A Model of Competition between Open-Source and Close-Source Software
by MA Dan
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Date: Time: Venue: |
30 May 2007 (Wednesday)
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MA Dan |
We look forward to seeing you at this research seminar. |
Abstract
Open-source software (“OSS”) have grown to be significant component of many software product markets. OSS products, which are available free of charge and often have quality comparable to competing close-source software (“CSS'') products, have forced incumbent CSS sellers to adopt novel product and pricing strategies. Although OSS have attracted significant research interest, research has focused on the development of OSS rather than on its market impact. In this paper, we fill the gap in the literature and analyze the impact of OSS introduction on product qaulity and pricing strategy of an incumbent CSS provider. Our competition model captures these important features: the CSS provider has established market base and therefore enjoys first-mover advantages; the OSS quality increases continuously over time and may exceed the CSS quality at a certain time point; the use of software demonstrates positive network externality. We show that in order to compete with the free OSS, the price of CSS products will be reduced for both new and existing customers; the quality of the CSS products may increase, decrease, or remain the same, depending on users’ initial setup costs of using OSS. When such initial setup costs are high, users only benefit from software price reductions, while when such costs are lowered beyond a critical value, users mainly benefit from product quality improvements.
Biography
Ma Dan is an Assistant Professor at the School of Information Systems, Singapore Management University. She received her Ph.D. in Computers and Information Systems from University of Rochester in 2006. Her research interests are in the fields of information systems management, software systems design and analysis, impacts of IT adoption on business, and electronic commerce.