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The farmer and the cowman should be friends

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					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.
     Introduction of high fructose corn syrup
     Assumptions, scenarios, chaos

   Winter’s comments
       Every firm is a Walrasian auctioneer??
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
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
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?
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
More open source
 Lerner and Tirole (2004).The economics
  of technology sharing: Open source and
  beyond
 Quah (2002). 24/7 competitive innovation
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
Agent heterogeneity
   Each firm has traditional characteristics
    (initial resources, vision, metabolism)

   Each firm also has a characteristic that
    determines its harvesting efficiency and
    rate
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?
Model heterogeneity
 Rate of new entrants
 Reproduction/survival rules
 Trading rules

				
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posted:5/20/2013
language:English
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