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The farmer and the cowman should be friends

The farmer and the cowman should be friends. Dynamics of open source and proprietary software Mark Madrilejo February 7, 2006. Economics of information and uncertainty. Porter and Spence (1978). The capacity expansion process in a growing oligopoly: the case of corn wet milling.

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The farmer and the cowman should be friends

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  1. The farmer and the cowman should be friends Dynamics of open source and proprietary software Mark Madrilejo February 7, 2006

  2. Economics of information and uncertainty • Porter and Spence (1978). The capacity expansion process in a growing oligopoly: the case of corn wet milling. • Introduction of high fructose corn syrup • Assumptions, scenarios, chaos • Winter’s comments • Every firm is a Walrasian auctioneer??

  3. Nelson and Winters • Nelson and Winters (1982). An Evolutionary Theory of Economic Change • Nelson (1995). Recent Evolutionary Theorizing about Economic Change • Schumpeterian evolution of the market: • Firms enter, firms die, routines propagate

  4. Broad question • What are the dynamics of a market that undergoes an unanticipated discontinuity? • (… which is all markets) • Rate of entrants, risk aversion, initial state, common vs. private knowledge

  5. Narrower question • Consider a set of firms that can improve themselves by obtaining software through open source or proprietary channels. (routines in NelWin) • Under what conditions will open source and proprietary software share the market?

  6. Open source • Johnson (2002). Open source software: Private provision of a public good • Lerner and Tirole (2002). Some simple economics of open source • Parker and Marshall W. van Alstyne (2005). Innovation through optimal licensing in free markets and free software

  7. More open source • Lerner and Tirole (2004).The economics of technology sharing: Open source and beyond • Quah (2002). 24/7 competitive innovation

  8. Environment, Agents • A space of opportunities. Each location has a maximum value and a growth rate. • Firms that roam the space and harvest resources, but also interact with other firms

  9. Agent heterogeneity • Each firm has traditional characteristics (initial resources, vision, metabolism) • Each firm also has a characteristic that determines its harvesting efficiency and rate

  10. Harvesting efficiency • Can come from components developed in house, shared freely, or purchased from other firms • Components can vary in terms of benefit: uncertainty, network effects, decay • “Component opportunities”: variation in predicted cost? • Do components just happen, or are they part of the environment?

  11. Model heterogeneity • Rate of new entrants • Reproduction/survival rules • Trading rules

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