Article | Management Science | July 2006

Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows

by Ramon Casadesus-Masanell and Pankaj Ghemawat

Abstract

This paper analyzes a dynamic mixed duopoly in which a profit-maximizing competitor interacts with a competitor that prices at zero (or marginal cost), with the cumulation of output affecting their relative positions over time. The modeling effort is motivated by interactions between Linux, an open-source operating system, and Microsoft's Windows, and consequently emphasizes demand-side learning effects that generate dynamic scale economies (or network externalities). Analytical characterizations of the equilibrium under such conditions are offered, and some comparative static and welfare effects are examined.

Keywords: open source software; demand-side learning; Network Effects; Linux; mixed duopoly; competitive dynamics; business models; Duopoly and Oligopoly; Information Technology; Software; Business Model; Mathematical Methods; Technology Platform; Profit; Balance and Stability; Management Analysis, Tools, and Techniques; SWOT Analysis; Competition; Price; Information Technology Industry;

Citation:

Casadesus-Masanell, Ramon, and Pankaj Ghemawat. "Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows." Management Science 52, no. 7 (July 2006): 1072–1084.