Simple Economics of Open Source

by Josh Lerner, Harvard Business School and Jean Tirole, Institut D’ Economie Indutrielle (IDEI) The original paper at the SSRN Electronic Paper Collection

Abstract: There has been a recent surge of interest in open source software development, which involves developers at many different locations and organizations sharing code to develop and refine programs. To an economist, the behavior of individual programmers and commercial companies engaged in open source projects is initially startling. This paper makes a preliminary exploration of the economics of open source software. We highlight the extent to which labor economics, especially the literature on “career concerns,” can explain many of these projects’ features. Aspects of the future of open source development process, however, remain somewhat difficult to predict with “off-the-shelf” economic models.