Standardization in Decentralized Economies
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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|Date of creation:||1999|
|Date of revision:|
|Publication status:||Published in American Economic Review, vol. 90, 2000, p. 550-570.|
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