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The impact of open source software on proprietary software firms’ profit and social welfare

Mingqing Xing

open source software has been achieved notable success in recent years and becomes a powerful rival to proprietary software in the software industry. Through modifying the Cournot model, this study analyzes how open source software affects the profit of proprietary software firms and social welfare. This paper supposes that proprietary software firms aim at maximizing profit and open source software can be freely available. It mainly finds that the emergence of open source software doesn’t always decrease (resp. reduce) the proprietary software firm’s profit or output (resp. price) and increase the social welfare. This conclusion contradicts the traditional recognition of people to open source software