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Competing Networks and Proprietary Standards: The Case of Quadraphonic Sound

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  • Postrel, Steven R
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    Abstract

    Quadraphonic audio systems failed to replace stereo in the 1970s despite backing from all the major manufacturers and recording houses. Network externalities played a significant role in this episode, and the author uses the installed-base model of J. Farrell and G. Saloner (1986) to explain quad's failure. The author finds that the introduction of competing incompatible quadraphonic systems hindered the development of a viable user base, and he argues that the systems' sponsors introduced their products in a technologically premature state in order to prevent one another from preemptively establishing the quad standard. As a result, self-fulfilling consumer and retailer expectations doomed quadraphonic sound. Copyright 1990 by Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

    Volume (Year): 39 (1990)
    Issue (Month): 2 (December)
    Pages: 169-85

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    Handle: RePEc:bla:jindec:v:39:y:1990:i:2:p:169-85

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    Cited by:
    1. Heli Koski & Tobias Kretschmer, 2004. "Survey on competing in network industries : firm strategies, market outcomes, and policy implications," LSE Research Online Documents on Economics 803, London School of Economics and Political Science, LSE Library.
    2. Lea, Gary & Hall, Peter, 2004. "Standards and intellectual property rights: an economic and legal perspective," Information Economics and Policy, Elsevier, vol. 16(1), pages 67-89, March.
    3. Kerstan, Sven & Kretschmer, Tobias & Muehlfeld, Katrin, 2012. "The dynamics of pre-market standardization," Information Economics and Policy, Elsevier, vol. 24(2), pages 105-119.
    4. Angelique Augereau & Shane Greenstein & Marc Rysman, 2004. "Coordination vs. Differentiation in a Standards War: 56K Modems," NBER Working Papers 10334, National Bureau of Economic Research, Inc.
    5. Tobias Kretschmer & Katrin Muehlfeld, 2006. "Co-Opetition and Prelaunch in Standard-Setting for Developing Technologies," CEP Discussion Papers dp0742, Centre for Economic Performance, LSE.
    6. Tobias Kretschmer & Katrin Muehlfeld, 2004. "Co-opetition in Standard-Setting: The Case of the Compact Disc," Working Papers 04-14, NET Institute, revised Oct 2004.
    7. Koski, Heli & Kretschmer, Tobias, 2002. "Entry, Standards and Competition : Firm Strategies and the Diffusion of Mobile Telephony," Discussion Papers 824, The Research Institute of the Finnish Economy.
    8. Marc Rysman, 2003. "Differentiation Across Standards and Adoption Failure in 56K Modems," Working Papers 03-12, NET Institute, revised Dec 2003.
    9. K├Ânig, Raina & Stephan, Michael, 2007. "Market take-off in systemic industries: The early industry life cycle stage in the mobile payment industry," Discussion Papers on Strategy and Innovation 07-03, Department of Technology and Innovation Management (TIM), Philipps-University Marburg.
    10. Roberto Fontana, 2003. "Rapid Technical Change and the Speed of Lock-in: Standard Battles in the Local Area Network Industry in the 1990s," KITeS Working Papers 146, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2003.

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