Private Provision of a Complementary Public Good

Private Provision of a Complementary Public Good

 

]Author: Richard Schmidtke

Date: June 2004

 

For several years, an increasing number of firms have begun to invest in open source software (OSS). While improvements in such a non-excludable public good are not appropriable, companies can benefit indirectly in a complementary proprietary segment. We study this incentive for investment in OSS. In particular we ask how (1) market entry and (2) public investments in the public good affects the firms’ behaviour and profits. Surprisingly, we find that there exist cases where incumbents benefit from market entry. Moreover, we show the counter-intuitive result that public spending has not to result in decreasing voluntary private contribution.

 

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