Adoption of Standards Under Uncertainty

Michael Ostrovsky and Michael Schwarz ()
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Michael Schwarz: Harvard University and Stanford University

RAND Journal of Economics, 2005, vol. 36, issue 4, 816-832

Abstract: The presence of noise in compliance times may have a critical impact on the selection of new technological standards. A technically superior standard is not necessarily viable because an arbitrarily small amount of noise may render coordination on that standard impossible. We introduce the concept of a firm's "support ratio," defined as a function that depends only on characteristics of that firm. We show that for sufficiently patient firms, the viability of a standard does not depend on the distribution of noise in compliance times. The criterion for the viability of a standard is that the sum of support ratios of all firms be smaller than one.

Date: 2005
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