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Competing Networks and Proprietary Standards: The Case of Quadraphonic Sound

Steven R. Postrel
The Journal of Industrial Economics
Vol. 39, No. 2 (Dec., 1990), pp. 169-185
Published by: Wiley
DOI: 10.2307/2098492
Stable URL: http://www.jstor.org/stable/2098492
Page Count: 17
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Competing Networks and Proprietary Standards: The Case of Quadraphonic Sound
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Abstract

Quadraphonic audio systems failed to replace stereo in the 1970s, despite backing from all the major manufacturers and recording houses. Network externalities played a significant role in this episode, and I use the installed-base model of Farrell and Saloner [1986] to explain quad's failure. I find that the introduction of competing incompatible quadraphonic systems hindered the development of a viable user base, and I argue that the systems' sponsors introduced their products in a technologically premature state in order to prevent one another from preemptively establishing the quad standard. As a result, self-fulfilling consumer and retailer expectations doomed quadraphonic sound.

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