Rational incompatibility with international product standards
AbstractThis paper considers the incentives of firms to conform to an exogenous international product standard. Product standardization enables traditional, price-based international competition. But the existence of redesign costs or network effects creates market frictions that diminish the incentive to standardize if there already exists a different technology in an established market. This leads to multi-attribute competition between products and will generally reduce trade flows. Not only do incumbent firms using a different technology have an incentive to deviate from the international standard, but a host country government that is also concerned for the welfare of consumers who own the old technology has no incentive to enforce the international standard. Indeed, the government may value deviation from the international standard more than the firm does, thereby creating incentives to adopt and enforce technical barriers to trade. The results highlight the challenge lock-in effects pose to the international standard-setting process.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 54 (2001)
Issue (Month): 1 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505552
Other versions of this item:
- Barrett, Christopher B. & Yang, Yi-Nung, 1998. "Rational Incompatibility With International Product Standards," Economics Research Institute, ERI Study Papers 28342, Utah State University, Economics Department.
- Barrett, Christopher B. & Yang, Yi-Nung, 1999. "Rational Incompatibility With International Product Standards," Working Papers 14597, International Agricultural Trade Research Consortium.
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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