Open Source Software - An Economic Assessment

This study examines whether or not Open Source Software represents an economically suitable alternative to the proprietary commercial software market in terms of creating value-added and economic efficiency. Whereas no significant differences between both production processes are seen for customized software, the study comes to the conclusion that serious economic problems can occur in the field of packaged software. Starting from a discussion on how licenses like the GPL affect the ability to price software (which is usually below economic production costs), the impact of below cost pricing on the coordination capacity of software markets (customer sovereignty, resource allocation, income distribution, adaptability and innovation) and the sustainability of complementary strategies of Open Source business models (with and without cross subsidization of the non-market OSS-core) are described. Throughout the study, the role of the pricing system within a market economy is stressed considering the specific characteristics of software as an economic good. Aspects other than economic are not taken into account.