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Posted Sep 11, 2006 19:21 UTC (Mon) by josh_stern (guest, #4868)
In reply to: more information by stevenj
Parent article: Windows will beat Linux threat, say academics (TechWorld)

Thanks for the citation. I had a look at the paper. The essence of the idea behind the abstract is that if we assume that buyers only look at their own self-interest for short term use of an OS (they are "myopic" and not "strategic" in the language of the article) and we assume that the value of the OS is proportional to its market share, and we assume that the rate of improvement of any OS increases with its market share (though maybe open source has a different rate increase function) and we assume that users start out with some positive valuation for MS-Windows in excess of Linux, and we assume a few other things necessary to write dynamic equations, then...

Given all of the above, there is some dynamic but non-zero price Microsoft can always set for their OS so it retains market share. Change any of the above assumptions and all bets are off. The paper is basically a math exercise.

According to my understanding, the model has nothing to say about the world for someone who already prefers Linux regardless of price. To anyone who believes that MS-Win is still better but that Linux is currently increasing in customer esteem at a faster rate than MS-Win, the model says that Microsoft is not following optimal behavior; it say that what MSFT needs to do is lower prices enough so that their market share is at least holding steady and ratio of rate of improvement is at least 1.

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Posted Sep 11, 2006 20:33 UTC (Mon) by superstoned (subscriber, #33164) [Link]

let me add to that: linux has a bit of a 'weird' advantage, and i'm not
sure this model can catch that: its Free. which, in this case, means it
can't go bankrupt. and as it's development will almost sure go on, no
matter what (well, it might be forbidden to develop free software), it's a
hard nut to crack.

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Posted Sep 11, 2006 22:22 UTC (Mon) by drag (subscriber, #31333) [Link]

That and from my very very limited understanding is that economic models that assume one thing or another about a average person's behavior in regards to having limited vision are pretty flawed.

I don't realy know a lot about it, but it seems to me that especially in business if your not a strategic thinker your not a successfull person. Your simply not going to be able to make a small business into a large one just by dumb luck and a limited view point. Now these people may not have the same view point as yourself, but that doesn't mean that they aren't thinkers.

If your big business you may exist on beurocratic stuff and pure momentum alone, but I don't think that will last.

It would be interesting to see a more complex model with maybe a it bit more 'game theory' mixed into, if that is a correct way of looking at it.

Of course the positive spin you could put on this article is that it does a good job of proving that long-term looking intellegent people should choose Linux because it offers more benifits and lower costs over time.

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Posted Sep 11, 2006 22:29 UTC (Mon) by josh_stern (guest, #4868) [Link]

Their model assumes Linus is free and doesn't say anything about costs to develop or bankruptcy. It also doesn't explain how Linux could have gotten started and gotten as far as it did - taken literally, it actually predicts that couldn't happen, so this is already a demonstration that the model isn't quite right. Another aspect that the model doesn't deal with is what type of ROI MSFT stockholders expect - i.e. even if they could theoretically drop Windows price as low as required for steady state, they might not be able to do that in reality.

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Posted Sep 12, 2006 5:00 UTC (Tue) by gdt (subscriber, #6284) [Link]

there is ... price Microsoft can always set for their OS so it retains market share.

And this strikes me as the flaw in the argument. There is actually a floor to the price Microsoft can charge, and that is the price which spooks Microsoft's shareholders. The model doesn't include this factor at all, but since Microsoft has an unusual relationship with its shareholders it is important to model this relationship rather than to assume the shareholders will be happy with a profit-maximising return.

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Posted Sep 12, 2006 16:27 UTC (Tue) by josh_stern (guest, #4868) [Link]

Agree. In another post I remarked on that problem and the problem that the model, if true, would have predicted Linux never rise to its current market share. One further issue is that part of the models assumption is that community based software improvement can play a significant role on MS-Windows as well as Linux and, while I don't question this premise per se, I question whether relying on a lot of community-based software for the MS-Windows platform wouldn't have the effect of further reducing the perception that MS-Win is a more valuable OS - another state assumption the model depends on. Let's look at an example of this in reality: on the one hand, having Firefox/Thunderbird and OpenOffice for MS-Win adds rational value to the platform, but on the other, users knowledge that same working software is available for them on Linux diminishes their perception of a value gap.