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Standardization in Decentralized Economies


  • Auriol, Emmanuelle
  • Benaim, Michel


This paper presents a dynamic model, inspired by evolutionary game theory, of how standards and norms emerge in decentralized economies. It shows that standardization outcomes depend on adopters' attitudes to problems caused by incompatibility. If individuals display aversion to incompatibility, standardization never fails to happen eventually, but societies sometimes end up picking inferior standards. In this case, official action can be useful to quickly achieve sensible standardization. On the other hand, when individuals display tolerance or neutrality to incompatibility, there is neither path-dependency nor a lock-in problem, and regulation seems a poor alternative to laissez-faire.
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Suggested Citation

  • Auriol, Emmanuelle & Benaim, Michel, 1999. "Standardization in Decentralized Economies," IDEI Working Papers 85, Institut d'Économie Industrielle (IDEI), Toulouse.
  • Handle: RePEc:ide:wpaper:691

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    References listed on IDEAS

    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. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
    3. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-1071, September.
    4. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    5. Loewenstein, George & Thaler, Richard H, 1989. "Intertemporal Choice," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 181-193, Fall.
    6. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    7. S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
    8. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    9. Brian Arthur, W. & Ermoliev, Yu. M. & Kaniovski, Yu. M., 1987. "Path-dependent processes and the emergence of macro-structure," European Journal of Operational Research, Elsevier, vol. 30(3), pages 294-303, June.
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    Cited by:

    1. Davide Infante & Janna Smirnova, 2010. "Market Failures within Poor Institutions: The Effects of Bureaucrats’ Rent-seeking Activity," Chapters,in: Institutional and Social Dynamics of Growth and Distribution, chapter 5 Edward Elgar Publishing.
    2. Auriol, Emmanuelle & Schilizzi, Steven, 2000. "Quality Signaling through Certification," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123598, Australian Agricultural and Resource Economics Society.
    3. Cristopher Spencer & Paul Temple, 2013. "Standards, Learning and Growth in Britain 1901-2009," School of Economics Discussion Papers 0613, School of Economics, University of Surrey.
    4. Auriol, Emmanuelle & Platteau, Jean-Philippe, 2017. "Religious co-option in autocracy: A theory inspired by history," Journal of Development Economics, Elsevier, vol. 127(C), pages 395-412.
    5. Luís Cabral, 2011. "Dynamic Price Competition with Network Effects," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 83-111.
    6. Emmanuelle Auriol & Antonio Estache & Liam Wren-Lewis, 2017. "Can Supranational Infrastructure Regulation Compensate for National Institutional Weaknesses ?," Working Papers ECARES ECARES 2017-11, ULB -- Universite Libre de Bruxelles.
    7. Klimenko, Mikhail M., 2009. "Policies and international trade agreements on technical compatibility for industries with network externalities," Journal of International Economics, Elsevier, vol. 77(2), pages 151-166, April.
    8. Markovich, Sarit, 2008. "Snowball: A dynamic oligopoly model with indirect network effects," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 909-938, March.
    9. Christopher Spencer & Paul Temple, 2012. "Alternative Paths of Learning: Standardisation and Growth in Britain, 1901-2009," Discussion Paper Series 2012_10, Department of Economics, Loughborough University, revised Oct 2012.
    10. Cantillon, Estelle & Yin, Pai-Ling, 2007. "How and when do markets tip? Lessons from the Battle of the Bund," Working Paper Series 766, European Central Bank.

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    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality


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