Open source versus closed source: Software quality in monopoly and competitive markets

The open source model of software development has received substantial attention in the industry and popular media; nevertheless, critics frequently contend that open source softwares are inferior in quality compared to closed source softwares because of lack of incentives and project management, while proponents argue the opposite. This paper examines this quality debate by modeling and analyzing software quality, demand, profitability, and welfare under open and closed source environments in monopoly and competitive markets. The results show no dominant quality advantage of one method over another under all circumstances. Both open source and closed source qualities decrease in a competitive market. Conditions under which each method can generate higher quality software are examined.