«Game Theory, Competition and Cooperation Alexandre Oliva oliva lxoliva Summary ...»
BSDlike licenses (those based on or similar to the modified Berkeley Software Distribution license, without the advertising clause) impose attribution as the single requirement: sharing the code is considered good, cooperation is welcome, and reusing the code even in proprietary software is acceptable, as long as the authors of the original software are acknowledged. Although there is economic incentive to contribute code back instead of maintaining forks with proprietary improvements, the reasoning that led to keeping additions proprietary may remain, turning such potential contributors into free riders, with a potential outcome similar to the depletion scenario in the tragedy of the commons: the more free riders there are, the fewer contributors there are to improve the common code base.
A credible commitment to steer people away from the freeriding temptation is the GNU General Public License, that grants the four freedoms to anyone who receives the software, enabling people to distribute modified copies of the software only if they use the same license, thus extending the freedoms to users of the improved software. By forbidding any third party from turning the software proprietary, the license prevents the creation of proprietary forks. Furthermore, even if a potential contributor chooses to not contribute her changes to the maintainer of the original project, any third party that obtains the modified software may choose to merge the changes upstream. Therefore, most competitors tend to choose to shortcircuit this process and contribute the changes themselves, such that they get the redit and goodwill from it. It’s still a very competitive c marketplace, but competition is enriched with a significant amount of cooperation. As developers contribute their changes to the common code base, all of them get better grounds to build upon, reducing waste of resources, increasing economic efficiency and enabling each vendor to differentiate from others to better serve their chosen market niche starting from a better code base. As John Nash’s character put it, “The best result will come from everybody in the group doing what’s best for himself, and the group”.
best outcome, so let me try to show why. Consider a number of vendors competing for a market niche of a given size, at a given time. Assume that, in this marketplace snapshot, they all offer products, developed from scratch, that are functionally equivalent, but are offered under different licensing terms. Further assume that some of them choose to use proprietary licensing terms, some use a BSDlike license, and some use the GNU GPL.
We can reason that, since the software products are essentially equivalent, the cost to develop them should have been essentially the same, and the market will not concentrate around any single vendor; rather, each vendor should get an essentially identical fraction of the market. Since the market is divided equally, income from this product is the same for all vendors, so those with lower costs will get the highest payoffs.
Proprietary vendors tend to not cooperate, and thus incur the entire development costs k by themselves. Free Software vendors can cooperate, thus dividing their costs among the several vendors n b and n g, thus reducing the amount each one has to fork over to get the product ready, even in the presence of redundant efforts. The more contributors there are, the better off Free Software vendors end up, since the lower their individual costs tend to be.
So far, BSDlike and GPL appear to be equally advantageous, the balance pending to whatever community is bigger. However, since software licensed under BSDlike terms can be relicensed under any other license, the BSD vendors may actually help reduce the costs incurred by proprietary and GPL vendors, since both categories can choose to reuse BSD software in their products. I.e., the fact that GPL code can use BSD code, but not the other way around, implies that n g n b and therefore the economic balance tends to favor GPL vendors.
It is true that the scenario above relies on a number of strong assumptions, but I do believe it can be generalized. One of the most critical assumptions is the fact that we’re looking at a snapshot of a new marketplace. If we add dynamics to it, we have to factor in many other aspects, such as networking effects, compatibility issues and several others taken into account in [AP, JPJ].
A common objection to this model, that is actually not true, is that Free Software will tend to shrink the total market value, since any entrant vendor can start by taking the existing code base and taking it as a product to market for a nearlyzero cost. Consider than one such vendor won’t have any distinguishing feature to increase its market share, other than the low price tag. Acting in a selfish and rational manner, it won’t set the cost to zero, but rather right below the price exercised by other vendors, that do incur actual costs to maintain the software. If multiple such vendors try this trick, they may actually succeed in driving the price down to zero, but this would tend to take the real software maintainers out of the market, leaving these entrants in a situation in which they have to do the actual work to satisfy their contractual obligations toward their customers. If they fail and go out of the market as well, the higherpaid competitors get a chance of getting contracts again, if they haven’t completely moved on; worst case, customers might end up having to hire individuals or new companies to do the work, increasing the market value again. The bottom line is that bargaining theory will lead the market to an equilibrium in which vendors get for their work an amount they consider reasonable, and customers pay a reasonable amount for such work.
4 Conclusion Choosing the GNU GPL can be the best choice not only for software users, for working against the formation of monopolies and unfair pricing; it can also be a dominant strategy, in the gametheoretical sense, for software developers and vendors, enabling them to share development costs and to achieve a better overall economic efficiency while still being fairly paid for their services.
References [WPJN] WIKIPEDIA. John Forbes Nash. http://wikipedia.org/wiki/John_Forbes_Nash [McC] MCCAIN, ROGER. Strategy and Conflict: An Introductory Sketch of Game
[TS] TUROCY, T. L.; VON STENGEL, B. Game Theory. Research Report LSE CDAM200109, CDAM, London School of Economics and Political Science, October
[WPGT] WIKIPEDIA. Game theory. http://wikipedia.org/wiki/Game_Theory [WPPD] WIKIPEDIA. Prisoner's dilemma. http://wikipedia.org/wiki/Prisoner%27s_Dilemma [AP] POLANSKI, A. General Public License a Rational Choice? http://merlin.fae.ua.es/nuevaweb/seminarios/OS.pdf, Nov 2005 [JPJ] JOHNSON, J. P. Economics of Open Source Software. http://opensource.mit.edu/papers/johnsonopensource.pdf, May 2001