Standardization in electronic money
Electronic money services are provided by the combination of Integrated Circuit (IC) cards and terminals. The compatibility of different brands of electronic money can be enabled by firms' joint adoption of standard terminals. In this paper, we analyse the effect of achieving compatibility among different brands of electronic money. We show that, if the unit production cost of a standard terminal is not so much different from that of a non-standard one, firms' joint adoption of standard terminals will increase the total sales of IC cards and the network size of terminals, thus raising consumers' surplus and firms' profits. On the other hand, if the unit cost of a standard terminal is so high that firms are discouraged from voluntarily adopting standard ones, the government may employ subsides to enhance efficiency. However, if the duty of implementing standardization is placed solely on the firms without subsidies, all the agents, including consumers and retailers, will be left worse off.
Volume (Year): 19 (2005)
Issue (Month): 3 ()
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- Gautam Gowrisankaran & Joanna Stavins, 2004.
"Network Externalities and Technology Adoption: Lessons from Electronic Payments,"
RAND Journal of Economics,
The RAND Corporation, vol. 35(2), pages 260-276, Summer.
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- Gautam Gowrisankaran & Joanna Stavins, 2002. "Network externalities and technology adoption: lessons from electronic payments," Working Paper Series 2002-16, Federal Reserve Bank of San Francisco.
- Gautam Gowrisankaran & Joanna Stavins, 2002. "Network Externalities and Technology Adoption: Lessons from Electronic Payments," NBER Working Papers 8943, National Bureau of Economic Research, Inc.
- Cowan, Robin, 1991. "Tortoises and Hares: Choice among Technologies of Unknown Merit," Economic Journal, Royal Economic Society, vol. 101(407), pages 801-814, July.
- 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. Full references (including those not matched with items on IDEAS)
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