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Fundamental Standards and Time Consistency

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  • Konrad, Kai A
  • Thum, Marcel

Abstract

Recent literature showed that government intervention is important to overcome market failures in the choice of standards. This paper shows that even benevolent and well-informed governments may be unable to overcome such market failures if fundamental standards are concerned. Costs and benefits of changes in fundamental standards are asymmetrically distributed over generations. Intergenerational coordination aimed at changing a current standard will fail because of a time consistency problem. With a simple model and several examples from the history of conventions, the authors discuss the conditions that might help overcome the time inconsistency in standard changing policies. Copyright 1993 by WWZ and Helbing & Lichtenhahn Verlag AG

Suggested Citation

  • Konrad, Kai A & Thum, Marcel, 1993. "Fundamental Standards and Time Consistency," Kyklos, Wiley Blackwell, vol. 46(4), pages 545-568.
  • Handle: RePEc:bla:kyklos:v:46:y:1993:i:4:p:545-68
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    References listed on IDEAS

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    1. Homburg, Stefan, 1988. "Theorie der Alterssicherung," EconStor Books, ZBW - German National Library of Economics, number 92902, June.
    2. Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
    3. Verbon, Harrie A A, 1986. "Altruism, Political Power and Public Pensions," Kyklos, Wiley Blackwell, vol. 39(3), pages 343-358.
    4. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    5. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    6. Blankart, C. & Knieps, G., 1991. "Path Dependence, Network Externalities and Standardization," Papers 439, Groningen State, Institute of Economic Research-.
    7. Blankart, Charles B & Knieps, Gunther, 1993. "State and Standards," Public Choice, Springer, vol. 77(1), pages 39-52, September.
    8. Thum, Marcel, 1994. "Network externalities, technological progress, and the competition of market contracts," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 269-289, June.
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    Cited by:

    1. Andersson, Fredrik & Konrad, Kai A., 2002. "Taxation and education investment in the tertiary sector
      [Besteuerung und Bildungsinvestitionen im tertiären Sektor]
      ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-17, Social Science Research Center Berlin (WZB).
    2. Roesel, Felix, 2017. "The causal effect of wrong-hand drive vehicles on road safety," Economics of Transportation, Elsevier, vol. 11, pages 15-22.

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