WHY DO COMMERCIAL FIRMS OPEN THE SOURCE CODE OF THEIR PRODUCTS?
Asundi, Jai, School of Management, University of Texas at Dallas, 2601 North Floyd Road,
Richardson, TX 75080, USA, asundi@utdallas.edu
Carare, Octavian, School of Management, University of Texas at Dallas, 2601 North Floyd Road,
Richardson, TX 75080, USA, carare@utdallas.edu
Dogan, Kutsal, Graduate School of Business, Ozyegin University, Kuşbakışı Cad. No:2, Altunizade,
Istanbul, 34662, Turkey, kutsal.dogan@ozyegin.edu.tr
Abstract
This paper is concerned with the economic trade‐offs associated with open‐sourcing, the business strategy
of releasing the source code of a commercial software product. We model open‐sourcing as a strategic
option for firms that compete in the market for software products. At the core of our model is the effect of
open‐sourcing on customer values, as well as the relative ease of customizing the open‐source products.
We show that open‐sourcing can arise as an equilibrium outcome in our two‐stage game. If the
enhancement of customer value from open‐sourcing is moderate or high, in equilibrium firms may find it
optimal to release the source code of their commercial software products even when this strategy may
reduce their profits.
Keywords: Open Source Software, Game Theory, Open‐sourcing, Competition