Open source and proprietary software: The social welfare analysis

The social welfare differs from a software market when monopolized by open source software (OSS) and proprietary software (PS) were investigated by modifying Cournot model. Assuming the market exhibits network externality and software user expectations are fulfilled or myopic, the results show that the social welfare of the market monopolized by OSS may be lower than that of this market monopolized by PS. Therefore the social planner should not unconditionally encourage open source software when developing the software industry policy. Moreover, the probability of “the social welfare of the market monopolized by OSS is lower (or higher) than that of this market monopolized by PS” may be affected by user's software development skill, OSS's learning (maintenance or development) cost and network externality.