Dual licensing in open source software markets

In this paper we present a theoretical model to study the characteristics and the commercial sustainability of a particular open source (OS) strategy known as dual licensing, the practice of distributing a software both under a commercial and an OS license. We show that the decision to employ a dual licensing strategy occurs whenever the strength and the relevance of the contribution of the OS community are sufficiently large, while it does not depend upon customers’ preferences towards license restrictiveness. The profitability of dual licensing crucially depends on the proper setting of the licensing terms of the OS distribution, which represents the key versioning tool; this analysis suggests a possible explanation for the observed proliferation of open source licenses. J.E.L. codes: L11, L17, L86, D45.

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