http://www.valt.helsinki.fi/staff/herkia/kava/Seminnarit/MI_...
That paper has a (simplified) model for the economics of free and proprietary software in the same marketplace. It basically shows that the best programmers have incentives to work on free software. It also shows that the price that the proprietary software maker places on the product directly affects the number of programmers working on the free alternative. Very cool paper that I reviewed for an economics course.