Competitive implications of software open‐sourcing

We analyze the economic trade‐offs associated with open‐sourcing, the business strategy of releasing free open‐source versions of commercial software products. We argue that the effect of the release of open‐source versions on the customers' perception of products is an important determinant of open‐sourcing outcomes. Open‐sourcing is modeled as a strategic option for duopolists that compete in a market for software products. We show that open‐sourcing can arise as an equilibrium outcome in our simple two‐stage game. If the enhancement of customer values from open‐sourcing is moderate or high, firms may find it optimal to release open‐source versions of their products.