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Does standardization really increase production ? Katz and Shapiro's result revisited

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  • Hubert Stahn

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

In market structures with network externalities, it is often asserted that there is a natural tendency toward standardization. In this paper it is argued that incompatible products may survive in static models. As Katz and Shapiro , I develop a simple multi-product oligopoly in which the demand for one of these commodities increases with the number of agents consuming this good. Instead I introduce cost functions and discus the limits of their results and exhibit an example which reverses these ones

Suggested Citation

  • Hubert Stahn, 1998. "Does standardization really increase production ? Katz and Shapiro's result revisited," Post-Print hal-05221014, HAL.
    • Handle: RePEc:hal:journl:hal-05221014
    DOI: 10.2307/20076122
    Note: View the original document on HAL open archive server: https://hal.science/hal-05221014v1
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    References listed on IDEAS

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    1. Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
    2. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    3. Farrell, Joseph & Shapiro, Carl, 1989. "Optimal Contracts with Lock-In," American Economic Review, American Economic Association, vol. 79(1), pages 51-68, March.
    4. Farrell, Joseph & Shapiro, Carl, 1987. "Optimal Contracts with Lock-In," Department of Economics, Working Paper Series qt19f324hf, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    5. Anne Perrot, 1993. "Compatibility, Networks, and Competition: A Review of Recent Advances," Transportation Science, INFORMS, vol. 27(1), pages 62-72, February.
    6. 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.
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