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Standardization in Decentralized Economies

Author

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  • Michel Benaim
  • Emmanuelle Auriol

Abstract

This paper presents a dynamic model, inspired by evolutionary game theory, of how standards and norms emerge in decentralized economies. It shows that standardization outcomes depend on adopters' attitudes to problems caused by incompatibility. If individuals display aversion to incompatibility, standardization never fails to happen eventually, but societies sometimes end up picking inferior standards. In this case, official action can be useful to quickly achieve sensible standardization. On the other hand, when individuals display tolerance or neutrality to incompatibility, there is neither path-dependency nor a lock-in problem, and regulation seems a poor alternative to laissez-faire.

Suggested Citation

  • Michel Benaim & Emmanuelle Auriol, 2000. "Standardization in Decentralized Economies," American Economic Review, American Economic Association, vol. 90(3), pages 550-570, June.
    • Handle: RePEc:aea:aecrev:v:90:y:2000:i:3:p:550-570
    Note: DOI: 10.1257/aer.90.3.550
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Davide Infante & Janna Smirnova, 2010. "Market Failures within Poor Institutions: The Effects of Bureaucrats’ Rent-seeking Activity," Chapters, in: Neri Salvadori (ed.), Institutional and Social Dynamics of Growth and Distribution, chapter 5, Edward Elgar Publishing.
    2. Auriol, Emmanuelle & Schilizzi, Steven, 2000. "Quality Signaling through Certification," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123598, Australian Agricultural and Resource Economics Society.
    3. Cristopher Spencer & Paul Temple, 2013. "Standards, Learning and Growth in Britain 1901-2009," School of Economics Discussion Papers 0613, School of Economics, University of Surrey.
    4. Ju, Xiaosheng & Jiang, Shengjun & Zhao, Qifeng, 2023. "Innovation effects of academic executives: Evidence from China," Research Policy, Elsevier, vol. 52(3).
    5. Auriol, Emmanuelle & Platteau, Jean-Philippe, 2017. "Religious co-option in autocracy: A theory inspired by history," Journal of Development Economics, Elsevier, vol. 127(C), pages 395-412.
    6. Emmanuelle Auriol & Antonio Estache & Liam Wren-Lewis, 2018. "Can Supranational Infrastructure Regulation Compensate for National Institutional Weaknesses?," Revue économique, Presses de Sciences-Po, vol. 69(6), pages 913-936.
    7. Luís Cabral, 2011. "Dynamic Price Competition with Network Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 83-111.
    8. Ming Hu & Joseph Milner & Jiahua Wu, 2016. "Liking and Following and the Newsvendor: Operations and Marketing Policies Under Social Influence," Management Science, INFORMS, vol. 62(3), pages 867-879, March.
    9. Klimenko, Mikhail M., 2009. "Policies and international trade agreements on technical compatibility for industries with network externalities," Journal of International Economics, Elsevier, vol. 77(2), pages 151-166, April.
    10. Markovich, Sarit, 2008. "Snowball: A dynamic oligopoly model with indirect network effects," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 909-938, March.
    11. Christopher Spencer & Paul Temple, 2012. "Alternative Paths of Learning: Standardisation and Growth in Britain, 1901-2009," Discussion Paper Series 2012_10, Department of Economics, Loughborough University, revised Oct 2012.
    12. Cantillon, Estelle & Yin, Pai-Ling, 2007. "How and when do markets tip? Lessons from the Battle of the Bund," Working Paper Series 766, European Central Bank.
    13. Lina Ma & Wanying Zhao & Longzhu Dong & Yushen Du, 2023. "Platforms Competition: An Ecosystem-View Analysis Based on Evolutionary Game Theory," SAGE Open, , vol. 13(4), pages 21582440231, December.

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    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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