Governments around the world are making or considering efforts to promote open-source software (typically produced by cooperatives of individuals) at the expense of proprietary software (generally sold by for-profit software developers). This paper examines the economic basis for these kinds of government interventions in the market. It first provides some background on the software industry. The paper discusses the industrial organization and performance of the proprietary software business and describes how the open-source movement produces and distributes software. It then surveys current government proposals and initiatives to support open-source software and examines whether there is a significant market failure that would justify such intervention in the software industry.
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