Competing Networks and Proprietary Standards: The Case of Quadraphonic Sound

Steven R Postrel

Journal of Industrial Economics, 1990, vol. 39, issue 2, 169-85

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 the author uses the installed-base model of J. Farrell and G. Saloner (1986) to explain quad's failure. The author finds that the introduction of competing incompatible quadraphonic systems hindered the development of a viable user base, and he argues 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. Copyright 1990 by Blackwell Publishing Ltd.

Date: 1990
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