The Economics of Linux and Free Software

Today, in a conversation with my Microeconomics professor on profit maximization I raised the question of Linux as a free alternative to Microsoft or Apple OS-es. Assuming a few things constant, such as demand for the products to be equal, it became clear that individual preferences are key as Linux, Windows, and Apple OS-es accomplish the same thing, albeit a few shortcomings. That is, in encouraging a consumer to move up or down the utility curve the OS has to cost less not only in monetary terms, but also in substitution value. Linux lacks the "plug-and-play" of many hardware specifically designed for Windows, but it allows greater flexibility in modifying the OS to your needs and perform various administrative actions with great modularity. In the case of Windows the OS costs quite a bit of money, it is not modular, and it is restrictive, yet for the consumer it is a familiar platform and requires a low learning curve to operate. The Apple OS on the other hand has a familiarity of use but upgrading the hardware is beyond the average consumer's abilities. Once could probably see the merits of predicting the consumer's preferences, say between Linux and Windows, in using game theory and the Nash Equilibrium. It might be interesting to revisit this topic at a later date.