Investment incentives in proprietary and open-source two-sided platforms
By: Ramon Casadesus-Masanell, Gastón Llanes
Contributors: Llanes, Gastón; Harvard Business School
Series: Working paper / Harvard Business School -- 12-114; Working paper (Harvard Business School) -- 12-114.
Publisher: Harvard Business School
Published: 2012
Place of publication: [Boston]
Language: eng
Number of pages: 28
Description: We study incentives to invest in platform quality in proprietary and open-source platforms. A comparison of monopoly platforms reveals that for a given level of user and developer adoption, investment incentives are stronger in proprietary platforms. However, open platforms may receive larger investment because they may benefit from wider adoption, which raises the returns to quality investment. We also study a mixed duopoly model of competition and examine how the price structure and investment incentives of the proprietary platform are affected by quality investments in the open platform. We find that access prices may increase or decrease as a result of investment in the open platform, and the sign of the change may be different for user and developer access prices. We also find that the proprietary platform may benefit from higher investment in the open platform when developers multi-home. This result helps explain why a proprietary platform such as Microsoft has chosen to contribute to the development of Linux.
Notes: "June 2012"--Publisher's Web site.

"June 28, 2012" -- added t.p.

Includes bibliographical references.