Open-Source Software: Who Needs Intellectual Property?

"Given that there are fixed costs of producing software and (it is commonly thought) competition drives profits to zero, how does this market function? How are the fixed costs covered? In the absence of profits from monopoly power, the source of income used to pay fixed costs is competitive returns. We will investigate three issues here. First, what is the source of the competitive returns that pay the bills of software developers? Second, is the market a real market? That is, do software producers in fact get adequate compensation for the fixed costs of their efforts? Or is open-source software, as is sometimes alleged, simply an elaborate altruistic charity? Finally, we ask how significant the open-source software market is. Is it a thriving source of innovation, or just a free-rider off the innovations of more traditional closed-source IP-protected software, making cheap imitations that never would have been produced in the first place absent monopoly power?"