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Standardization, Compatibility, and Innovation
Joseph Farrell and Garth Saloner
The RAND Journal of Economics
Vol. 16, No. 1 (Spring, 1985), pp. 70-83
Stable URL: http://www.jstor.org/stable/2555589
Page Count: 14
You can always find the topics here!Topics: Inertia, Games, Standardization, Economic externalities, Economic benefits, Emerging technology, Technological innovation, Cost accounting, Product innovation, Government standards
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There are often benefits to consumers and to firms from standardization of a product. We examine whether these standardization benefits can "trap" an industry in an obsolete or inferior standard when there is a better alternative available. With complete information and identical preferences among firms the answer is no; but when information is incomplete this "excess inertia" can occur. We also discuss the extent to which the problem can be overcome by communication.
The RAND Journal of Economics © 1985 RAND Corporation