Economics of Standards in Information Networks by Tim Weitzel

By Tim Weitzel

Standards play a admired function in structures characterised by means of interplay. In info structures, criteria offer for compatibility and are a prerequisite for collaboration merits. extra as a rule talking, criteria represent networks. during this paintings, a standardization framework in accordance with an research of deficiencies of community impression concept and a online game theoretic community equilibrium research is built. primary determinants of diffusion strategies in networks (e.g. community topology, agent measurement, put in base) are pointed out and integrated right into a computer-based simulation version. for this reason, average community behaviour (specific diffusion styles) will be defined and lots of findings from conventional community influence conception may be defined as distinctive situations of the version at specific parameter constellations (e.g. low cost, excessive density). in this foundation, answer options for standardization difficulties are constructed, and a methodological direction in the direction of a unified idea of networks is proposed.

"... a crucial contribution to the economics of standardization, and the implications make the ebook a needs to for everybody operating within the field." (International magazine of IT criteria and Standardization Research)

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G. DybvigiSpatt 1983; Kindleberger 1983]. For the critical mass phenomenon see Meffert (1994,24), Picot (2000) provides a critical mass example in the Internet economy. Another problem throughout the network effect literature is the concept of superior technologies. Apart from difficulties in qualifying objective criteria for complex technology comparisons, the relative benefits of a technology cannot be defmed independently of the state of knowledge that itself depends on the technological path taken.

BranscomblKahin (1995) provide an overview of competing models for the standards process, the emergence of standards consortia, intellectual property, and the several potential roles of government. The institutional processes associated with standard setting are analyzed by David (1995). Lemley (1996) considers antitrust laws incapable of regulating standards-driven industries with phenomena like lock-in. g. LiebowitzlMargolis 1996). Trebing (1994) offers a view of failing telecommunication markets, while Carlton/Klamer (1983) show that for infrastructura1 industries such as railroads and electronic funds transfers, social welfare requires cooperation (even among competitors).

MatuteslRegibeau (1996, 183-209) describe benefits from network effects as depicted in Figure 2 where Vi denotes the utility of agent i derived from the technology (or stand-alone) effect ai and the network effect bin. g. on a decentralized market. Here, in contrast to "traditional" externalities in the economics literature a frequently observed proposition is not an inefficient externality inducing activity level but 30 rather an inefficient standards choice. 2 (see also Figure 2, bottom). But although the notion of network effects is intriguingly intuitive, there are necessary conditions for system behavior as evident in the figures above that are easily overlooked and that must be considered when interpreting and applying results.

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