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Network Externalities, Coordination Failures and Non-Standardization

Hubert Stahn

Annals of Economics and Statistics, 2002, issue 65, 195-218

Abstract: In this paper, I show that several standards may survive in markets characterized by network externalities. This result is not explained by strategic choices in an dynamic context. It simply follows from a failure of coordination. In fact, I consider a two stage game. In the first stage, the firms choose their standard. In the second stage, they choose their production levels in markets in which network externalities in the sens of Katz and Shapiro occur. Subgame perfect equilibria characterized by non-standardization exist but are socially inefficient.

Date: 2002
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Handle: RePEc:adr:anecst:y:2002:i:65:p:195-218