Study of the Competition between Proprietary Software Firms and Free/Libre Open Source Software Firms Using a Simulation Model

In recent years, a very important structural change in the software industry took place, with an increasing number of firms that got involved in Free/Libre Open Source Software (FLOSS) development communities. FLOSS communities and products have been studied as complementary to proprietary software companies and products. In this paper we propone a business model for the software market, and in particular we analyze the competition between proprietary software firms and FLOSS firms. Our software market is a system where each agent is independent of each other in the choice about buying or selling software products or services. The proposed work aims to analyze the influence of FLOSS firms producing both software and services in vertical software markets, nowadays mostly dominated by large proprietary firms. The findings show that FLOSS firms are able to compete with proprietary firms, though in the end a monopoly or oligopoly of the latters emerges. The ousted FLOSS firms, however, survive longer than proprietary ones, when these are not able to compete in the market.