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(Self-)Regulation of a Natural Monopoly via Complementary Goods - the Case of F/OSS Business Models

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  • Markus Pasche

    (University of Jena, Faculty of Economics)

Abstract

The paper investigates the optimal regulation of a (software) firm which acts as a natural monopolist, who also offers a complementary good (IT services) on a competitive market. It is shown that a first-best-regulation accompanyied with an optimal taxation schedule in order to compensate the losses is equivalent to a cross-subsidisation of the software by the complementary good. This is the same result as in business models with Free/Open Source Software (F/OSS). Even if a price of zero for F/OSS does not reflect the use of resources for software development, the price system in F/OSS related markets leads to a welfare improving allocation. F/OSS license models can be seen as institutional arrangements which mimick a social planner.

Suggested Citation

  • Markus Pasche, 2005. "(Self-)Regulation of a Natural Monopoly via Complementary Goods - the Case of F/OSS Business Models," Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) 18/2005, Friedrich Schiller University of Jena, School of of Economics and Business Administration.
    • Handle: RePEc:jen:jenasw:2005-18
    as

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    More about this item

    Keywords

    natural monopoly; regulation; Ramsey pricing; welfare; complementary good; Open Source Software;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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