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The dynamics of pre-market standardization

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  • Kerstan, Sven
  • Kretschmer, Tobias
  • Muehlfeld, Katrin

Abstract

This paper studies an under-explored phenomenon: standardization arising during the technology development stage from the interplay of incentives to compete and cooperate. We identify circumstances in which a firm will prelaunch its technology (i.e., publish detailed technological specifications) and the rival abandons its own technology to support a common standard in a two-stage two-player game with network effects and licensing and a fixed deadline for technological development. We find that failure to standardize predominantly occurs for technologies with very weak or very strong network effects, and for firms with similar technological capabilities. The outcome can depend on what would be perceived by market participants as a simultaneous prelaunch: a prelaunch on the same day, during the same week, or month, and so on, depending on how time is discretized.

Suggested Citation

  • Kerstan, Sven & Kretschmer, Tobias & Muehlfeld, Katrin, 2012. "The dynamics of pre-market standardization," Information Economics and Policy, Elsevier, vol. 24(2), pages 105-119.
    • Handle: RePEc:eee:iepoli:v:24:y:2012:i:2:p:105-119
    DOI: 10.1016/j.infoecopol.2011.11.002
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    More about this item

    Keywords

    Standardization; Network effects; Preemption; Standards battle;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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