The market for operating systems: Is it a penguin’s paradise?

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Computer Sciences | Economics | Physical Sciences and Mathematics | Social and Behavioral Sciences


James Schnepf, Computer Science; Louis Johnston, Economics


An operating system is a program that controls a computer’s resources: without it, a computer is useless. Open source software is available to the public in source code form and its use, modification and redistribution is allowed. The market for computer operating systems has been dominated by proprietary software but in the last decade the advent of Linux, an open source operating system, has posed a threat to the established order. This study is about how adverse selection and network externalities affect Linux in the operating systems market. In the segment for desktop operating systems, adverse selection and network externalities have a significant impact on market share and Linux has a remote chance of being a significant player in the market. In the server segment of the market, adverse selection and network externalities are not as important and Linux holds its own in the market.