Optimal Firm Contributions to Open Source Software

Abstract

This paper examines open source software development in a competitive environment. The quality of open source software improves over time based upon contributions by firms and users. A. firm's decision to contribute is interesting because it also augments competitors' software quality in future periods subject to compatibility considerations with their existing software. A differential game model is developed to understand why firms are increasingly involved in open source software development by determining the optimal contributions and software quality over time. We obtain a closed-loop Nash equilibrium solution. Examples are given to derive insights from this model.