Quantifying the Value of Open Source Hardware Development
Pearce, J.M. (2015) Quantifying the Value of Open Source Hardware Development. Modern Economy, 6, 1-11. doi: 10.4236/me.2015.61001. open access
The two primary methods of determining the value of FOSH design are shown below- full details are provided in the paper.
Downloaded Substitution Valuation
The downloaded substitution valuation uses the number of times that a FOSH design is accessed on the Internet to quantify the value of the design. The downloaded valuation for substitution savings, VD, is:
VD(t) = (Cp-Cf)x P x ND(t)
Where Cp is the cost to purchase a traditionally manufactured product, Cf is the marginal cost to fabricate it digitally using a distributed technique, P is the percent of downloads resulting in a product, and ND(t) is the number of times the digital design has been downloaded at time t. P is subject to error as downloading a design does not indicate that it was manufactured and a single download from a distribution website could be fabricated many times, traded via email, memory stick or posted on P2P sites that are not recorded. The savings from FOSH digital manufacturing (S=Cp-Cf) have been shown to be substantial in the developing world for appropriate technology and for consumer goods. S is maximized for custom low-volume products such as scientific equipment where Cf is generally only 1-10% of Cp (see the Open Source Lab).
Avoided Reproduction Valuation
A variation of the downloaded valuation is the avoided cost of reproduction value VR for a single company, which is given by:
VR=h x w
where h is the number of design hours needed to replicate the product and w is the hourly wage of the workers needed to produce the replication. This method of capturing value can also be extrapolated to all firms (and individuals that would hire firms or freelance designers to complete the design) to obtain the total value to society and is give in detail in the paper.