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Evolving Technologies and Standards Regulation

  • Luis Cabral
  • David Salant

The EU mandated a single standard for second generation wireless telecommunications, whereas the US allowed several incompatible standards to battle for market share. Motivated by this example, we argue that a single standard leads to a free riding problem, and thus to a significant decrease in marginal incentives for R&D investment. In this context, keeping two separate standards may be a necessary evil to sustain a high level of R&D expenditures. We also provide conditions such that a non-standardization equilibrium is better for consumers and for society as a whole.

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Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 08-16.

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Date of creation: 2008
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Handle: RePEc:ste:nystbu:08-16
Contact details of provider: Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/

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  11. Nisvan Erkal & Deborah Minehart, 2007. "Optimal Sharing Strategies in Dynamic Games of Research and Development," EAG Discussions Papers 200707, Department of Justice, Antitrust Division.
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  18. Church, Jeffrey & Gandal, Neil, 1993. "Complementary network externalities and technological adoption," International Journal of Industrial Organization, Elsevier, vol. 11(2), pages 239-260, June.
  19. Adam Brandenburger & Harborne Stuart, 2007. "Biform Games," Management Science, INFORMS, vol. 53(4), pages 537-549, April.
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