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Costing communication standards in information systems using a minimum cut approach

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  • A Kimms

    (Technische Universität Bergakademie Freiberg)

Abstract

On a very abstract level, an information system consists of a set of system elements which communicate with each other. Communication is an unproductive operation, so the time needed to communicate data should be kept as short as possible and, to put it in monetary terms, the opportunity costs for communication should be kept small. Now, communicating data is more than just transmitting it; it consists in large parts of converting data structures that are used by one system element into data structures that are used by another system element. Such conversion can be avoided, if the system elements, use a common standard of data structures. Since establishing a standard at a system element incurs standardization costs, a decision-maker has to check, if the cost savings gained by standardized communication outweigh the costs for installing the standard. In a recent paper by Buxmann et al 1, it is claimed that this so-called standardization problem is an NP-hard optimization problem without giving a formal proof for it. We will demonstrate that this claim is not true, but in fact the standardization problem can be solved in polynomial time by solving a minimum cut problem.

Suggested Citation

  • A Kimms, 2003. "Costing communication standards in information systems using a minimum cut approach," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(4), pages 426-431, April.
    • Handle: RePEc:pal:jorsoc:v:54:y:2003:i:4:d:10.1057_palgrave.jors.2601519
    DOI: 10.1057/palgrave.jors.2601519
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    References listed on IDEAS

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    1. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    2. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
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    4. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    5. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Farrell, Joseph & Saloner, Garth, 1988. "Coordination Through Committees and Markets," Department of Economics, Working Paper Series qt08w115vq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    7. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
    8. Buxmann, Peter, 1997. "The Standardization Problem," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 103263, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    9. Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
    10. repec:dar:wpaper:35829 is not listed on IDEAS
    11. Buxmann, Peter & Weitzel, Tim & König, Wolfgang, 1999. "Auswirkung alternativer Koordinationsmechanismen auf die Auswahl von Kommunikationsstandards," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 36517, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    12. Joseph Farrell & Garth Saloner, 1988. "Coordination through Committees and Markets," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 235-252, Summer.
    13. Buxmann, Peter, 1996. "Standardisierung betrieblicher Informationssysteme," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 103270, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    14. Farrell, Joseph & Saloner, Garth, 1987. "Coordination Through Committees and Markets," Department of Economics, Working Paper Series qt5sn4b6v4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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    Cited by:

    1. Schade, Sven & Buxmann, Peter, 2005. "A Prototype to Analyse and Support Standardization Decisions," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 35795, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).

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