Review of Industrial Organization

, Volume 26, Issue 2, pp 217–240 | Cite as

Government Policies Supporting Open Source Software for the Mass Market



This paper analyzes the impact on social welfare of government policies supporting open source software (OSS). Mass-market consumers can be divided between those who are informed about the existence of OSS and those who are uninformed. Since OSS producers have little incentive to advertise, there may be a substantial mass of uniformed consumers, leading to market failures that may justify government intervention. We study three government policies: (a) mandated adoption, whereby the government forces public agencies, schools, and universities to adopt OSS, (b) information provision, whereby the government informs the uninformed users about the existence and the characteristics of OSS, and (c) subsidy, whereby the government makes a payment to consumers if they adopt OSS. We show that mandated adoption and information provision may increase social welfare, but the subsidy always reduces it. When network externalities are added to the model, we show that mandated adoption and information provision may increase social welfare if they help the market to tip towards standardization.


information provision mandated adoption network externalities open source software software subsidy 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Berlecon (2002) Free/Libre and Open Source Software (FLOSS): Survey and Study. International Institute of Infonomics, University of Maastricht and Berlecon Research.Google Scholar
  2. Bessen, J. (2002) ‘What Good Is Free Software?’, in R. W. Hahn (ed.), Government Policy toward Open Source Software. AEI-Brookings Joint Center for Regulatory Studies.Google Scholar
  3. Bonaccorsi, A., Rossi, C. 2003‘Why Open Source Can Succeed’Research Policy.3212431258Google Scholar
  4. Evans, D. S., and B. Reddy (2002) ‘Government Preferences for Promoting Open-Source Software: A Solution in Search of a Problem’, N.E.R.A.working paper.Google Scholar
  5. Hahn, R. W. (2002) Government Policy toward Open Source Software . AEI-Brookings Joint Center for Regulatory Studies.Google Scholar
  6. Johnson, J. P. 2002‘Open Source Software: Private Provision of a Public Good’Journal of Economics and Management Strategy.11637662Google Scholar
  7. Lakhani, K. R., Hippel, E. von 2003‘How Open Source Software Works: ‘‘Free’’ User-to-User Assistance’Research Policy.32923943Google Scholar
  8. Lerner, J., Tirole, J. 2002a‘Some Simple Economics of Open Source’Journal of Industrial Economics.50197234Google Scholar
  9. Lerner, J., and J. Tirole (2002b) ‘The Scope of Open Source Licensing’, NBER working paper no.9363.Google Scholar
  10. Mustonen, M. 2003‘Copyleft: The Economics of Linux and Other Open Source Software’Information Economics and Policy.1599121Google Scholar
  11. Raymond, E. (1999) The Cathedral and the Bazaar: Musings on Linux and Open Source from an Accidental Revolutionary . OReilly and Associates.Google Scholar
  12. Rossi, M. A. (2004) ‘Decoding the ‘‘Free/Open Source (F/OSS) Software Puzzle’’. A Survey of Theoretical and Empirical Contributions’. University of Siena, Discussion Paper n. 424 -- April 2004.Google Scholar
  13. Schmidt, K., Schnitzer, M. 2003‘Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market’Harvard Journal of Law and Technology.16474505Google Scholar
  14. Shapiro, C., and H. R. Varian (2003) ‘Linux Adoption in the Public Sector: An Economic Analysis’. University of California at Berkeley working paper.Google Scholar
  15. Shy, O. 2001The Economics of Network Industries Cambridge University PressNew YorkGoogle Scholar
  16. Smith, B. L. (2002) ‘The Future of Software: Enabling the Marketplace to Decide’, in R. W. Hahn, (ed)., Government Policy toward Open Source Software. AEI-Brookings Joint Center for Regulatory Studies.Google Scholar
  17. Valimaki, M. 2003‘Dual Licensing in Open Source Software Industry’Systems d’Information et Management.86375Google Scholar

Copyright information

© Springer 2005

Authors and Affiliations

  1. 1.Dipartimento di EconomiaUniversitá di TrentoTrentoItaly
  2. 2.Dipartimento di Scienze Economiche “M. Fanno”Universitá di PadovaPadovaItaly

Personalised recommendations