Article ID: | iaor20081426 |
Country: | United States |
Volume: | 52 |
Issue: | 7 |
Start Page Number: | 1072 |
End Page Number: | 1084 |
Publication Date: | Jul 2006 |
Journal: | Management Science |
Authors: | Ghemawat Pankaj, Casadesus-Masanell Ramon |
Keywords: | computers |
This paper analyzes a dynamic mixed duopoly in which a profit-maximizing competitor interacts with a competitor that prices at zero (or marginal cost), with the cumulation of output affecting their relative positions over time. The modeling effort is motivated by interactions between Linux, an open source operating system, and Microsoft's Windows and consequently emphasizes demand-side learning effects that generate dynamic scale economies (or network externalities). Analytical characterizations of the equilibrium under such conditions are offered, and some comparative static and welfare effects are examined.