Dynamic mixed duopoly: A model motivated by Linux vs. Windows

Dynamic mixed duopoly: A model motivated by Linux vs. Windows

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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: ,
Keywords: computers
Abstract:

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.

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