Conditions

The model uses autonomous agents: buyers and sellers who populate a computer simulation. By using agents, the assumptions concern the actions of buyers and sellers rather than assumptions on the level of the entire market. It comprises agent inputs, outputs and the relationships of these with its internal state. The simulation uses statistics which formulate a time-history of the simulated economy. The model insures repeatability and stability of solutions. However, general properties (convergence/scalability and stability) of agent-based systems are not solved. The model is simplified, presenting an idealized market with a software product traded offered by a number of companies. The price is established in the current period, the profit of the previous period is all used for advertising. Buyers are influenced by: code, market share, advertising effort, willingness to buy new codes. For the open source, there is no advertising and no charge.

The code’s characteristics are: price and brand (the quality is not known). The open source is free of charge (not free to modify and develop). There is a price limit for the user, a market share, an advertising budget, and random effects (which influence the willingness to sample new codes). There are only fixed costs, variable costs are zero. For the open source, there are no costs at all, manufacturing and distribution costs are zero (the only cost is the time used for the download and CD-writing). The open source developers use, share and develop source code, but they represent a small part of the software market.

Free-rider using open source

Scientific researchers have their own paradigm of constant exchange of knowledge similar to that in the open source community, because science advances most rapidly when discoveries are made known to other scientists who can add their intuitions to them. Scientists gain fulfillment from the publication of their work, because this increases their stature among other scientists and in general determines the success of their careers. Scientists routinely use open source as a means of publishing the software component of their work. In addition, scientists are motivated by the desire to be of benefit to society. Thus, to scientific participants, users are of benefit and should not be considered free-riders.

There is some question regarding whether the free-rider problem is as significant in the case of software as it is for other sorts of products, and whether it applies to open source at all. A free-rider on a bus uses the scarce resource of a seat, so that a potential paying rider could be denied a chance to ride the bus. A free-rider who has bootlegged a copy of Microsoft Windows may or may not diminish the market for paid copies of Windows, but does not use any scarce resource that would exclude other Windows users. A free-rider using open source does not diminish a market or use any scarce resource.

Open Source versus Free-Rider

The free-rider problem is familiar in economics. It means taking advantage of a product or service without providing any return to the provider of that product or service. All open source users start out as free-riders. They download and try the software, and perhaps deploy it, and do not generally consider contributing to that software's development until they are already using it and desire an additional feature.

If they desire an additional feature, they may implement that feature themselves rather than pay one of the initial developers. At this point, they are not free riders. Businesses that join an open source project as developers contribute some software to the product, and all of those businesses derive an economic benefit from making use of the software in a cost-center of their business. There are developers that are not motivated by the desire to provide software for a business cost-center. These are individuals whose motivations are primarily artistic, and scientific researchers.

Volunteers derive emotional fulfillment from having users for their software, just as artists derive fulfillment from having others appreciate their paintings. For volunteers, users provide an intangible benefit which the volunteer desires. Thus, those users should not be considered free-riders.

Companies that place importance in a particular open source product tend to hire developers who have already gained stature as a developer of that product. Thus, individuals who have started with no pecuniary interest in the open source project tend to find employment with an organization that does have such an interest. And thus individuals who participate in open source development often reap an economic gain from that participation. This is another reason that users should not be considered free-riders by these individuals.

Economic benefits

Open source enables a majority of web servers, a majority of email deliveries, and many other businesses, organizations, and personal pursuits. Any improvement in technology that permits business to function more efficiently means the economy runs more efficiently. In this case, open source enables business to spend less on software and to have better quality and more control over its software. The money that is saved on software does not disappear; the people who save it spend it on things that are more important to them.

It may be that open source eventually causes a reduction in demand for proprietary software. This would not, however, reduce the demand for programmers, because the demand for software in general would not decrease. The displaced proprietary programmers would move to an organization that can produce open source software in an economically successful manner.

Job Review & Pay Raise

Yesterday was a great day, other than having my yearly physical. My boss called me and we went over my yearly review (this is my first one). Everything was very positive, and he made some recommendations on things that I can do to help get me promoted to the next level. Then, he told me that my salary will increase starting in July from $58,000 to $63,000. Wow! I was so excited to hear that. I was expecting to go up to around $60,000.

My plans for the pay increase is to increase my 401(k) contribution from 8% to 10% (so I'll go from adding $386.67 each month to $525.00 each month). After the extra taxes are taken out, I should have about $150 extra over what I make now. I plan on adding a little to some of the categories of my monthly spending plan and then applying the rest towards my Freedom Account and then debt. That should really help to speed up the process.