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Title:Intellectual property rights and ex-post transaction costs: the case of open and closed source software PDF Logo
Authors:von Engelhardt, Sebastian
Issue Date:2008
Series/Report no.:Jena economic research papers 2008,047
Abstract:The economic characteristics of software and transaction costs explain, why closed source and open source software co-exist. It is about the efficient use of a non- and anti-scarce resource. But because of ex-post transaction costs that lead to information asymmetries, some property rights regarding the resource source code are not exclusively separable. Thus, the first best allocation of property rights, that would yield an optimal usage of a source code, is not realizable. Or, that is to say, a first best realization of contracts is not feasible. Hence, open and closed source software are two second best arrangements, both with specific assets and drawbacks. The principle of closed source benefits from direct (monetary) incentives and control, but has limits in its scope (size) because of transaction costs. Open source, on the one hand, benefits from its openness that creates spillovers and enables to incorporate human capital that is not acquirable for closed source firms. On the other hand, there are costs of openness, such as coordination costs (consensus finding, etc.) the danger of free riding or under provision, or forking.
Subjects:Open source
intellectual property rights
transaction costs
information goods
modeling property rights
JEL:D23
L17
L22
O34
Document Type:Working Paper
Appears in Collections:Jena Economic Research Papers, MPI für Ökonomik

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