Rational Incompatibility With International Product Standards
This 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.
(This abstract was borrowed from another version of this item.)
|Date of creation:||1998|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.usu.edu/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gandal, Neil, 1995. "Competing Compatibility Standards and Network Externalities in the PC Software Market," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 599-608, November.
- Matutes, Carmen & Regibeau, Pierre, 1996. "A selective review of the economics of standardization. Entry deterrence, technological progress and international competition," European Journal of Political Economy, Elsevier, vol. 12(2), pages 183-209, September.
- Katz, Michael L & Shapiro, Carl, 1986. "Product Compatibility Choice in a Market with Technological Progress," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 146-65, Suppl. No.
- Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
- Pargal, Sheoli, 1996. "Do incompatible network standards lead to domestic benefits? The case of color television," Information Economics and Policy, Elsevier, vol. 8(3), pages 205-227, September.
- 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.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
- Kindleberger, Charles P, 1983. "Standards as Public, Collective and Private Goods," Kyklos, Wiley Blackwell, vol. 36(3), pages 377-96.
- Farrell, Joseph & Saloner, Garth, 1986. "Standardization and variety," Economics Letters, Elsevier, vol. 20(1), pages 71-74.
- Casella, Alessandra, 1997.
"Product Standards Coalitions in a Market without Borders,"
CEPR Discussion Papers
1584, C.E.P.R. Discussion Papers.
- Alessandra Casella, 1996. "Product Standards Coalitions in a Market Without Borders," NBER Working Papers 5853, National Bureau of Economic Research, Inc.
- Shy, Oz, 1996. "Technology revolutions in the presence of network externalities," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 785-800, October.
- Carmen Matutes & Pierre Regibeau, 1988. ""Mix and Match": Product Compatibility without Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 221-234, Summer.
When requesting a correction, please mention this item's handle: RePEc:ags:usuesp:28342. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.