Internet Services and the Standard Setting Process: the Case of Instant Messaging Services

Marc van Wegberg ()
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Marc van Wegberg: Faculty of Economics and Business Administration, University of Maastricht, MD Maastricht, The Netherlands

Homo Oeconomicus, 2003, vol. 20, 63-78

Abstract: This paper studies the link between the dynamics of service creation and the organization of standardization processes. Compatibility standards for network technologies create positive network externalities for the final users. Standard setting is, however, a costly process. There are organizational coordination costs to consider. Timing also plays a role. If firms start a new service before there is a standard, they face switching costs when switching to the newly standardized technology. If they wait with market entry till a standard is developed, they incur waiting costs. The paper identifies the main factors that drive the choice of standardization mode. These include network effects, technology, and bargaining costs.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:hom:homoec:v:20:y:2003:p:63-78

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