Octavian Carare

This paper is concerned with the economic trade-offs associated with open-sourcing, the business strategy of releasing the source code of a commercial software product. We model open-sourcing as a strategic option for firms that compete in the market for software products. At the core of our model is the effect of open-sourcing on customer values, as well as the relative ease of customizing the open-source products.We show that open-sourcing can arise as an equilibrium outcome in our two-stage game.

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.