Compatibility and Standardizatio Flashcards
In setting standards, if a government doesnt step in, what would happen to establishing standards
negotiation
standard leaders
standard wars
what are the end results of standard wars
end in market sharing
end with an agreement
fight to the death
What are the four combination of compatability standards
straightforward adoption
standards war
battle of the sexes
matching pennies
Difference between evolutionary and revolutionary strategies
Ecvolutionary - make technologies backwards compatible so that people can easily switch from an older technology
Revolutionary: make technology backwards incompatible with
rival revolutions, rival evolution, evolution vs revolution
Compare evolution vs revolution based on compat, performance, tech value, installed base, riskiness, technical/legal obstacles
compat - smooth migration vs brute force
perfomance - gives up some performance for compatibility vs offering best product possible
tech value - ideal for tech advances vs ideal for superior tech
risk - less risky, ore risky because it depends on switching costs and expectations
tech/legal obstacles - difficult technologically, incumbents with IP vs requiring powerful allies, attractive price and performance ratio, usually cannot occur on small scale
OPen vs control strategies
open - anyone can make a product based on the standard or only members of the alliance, giving free access to new technology, giving away licences
control strategies - there is single market leadership - strict property control over own system
Which strategy (open or closed) would be taken
depends on
strength of network effects (contribution to industry value)
superiority of own product (profit margin) and market share
Compare evolution/revolution and control/open strategies
controlled evolution - best for industry leaders with secure market domination
open evolution - tech advancement is not strong enough and needs industry wide network effects
controlled revolution
new entrants with compelling new technologies that do not need to worry about backward compatibility
Open revolution - superior product but needs market effects (floppies, cds)
Network effects may cause..
standard wars, defacto standardization and market failures
Two types of public interventions
Ex-ante inteventions (de jure standardization) - public authorities take an active part in the competition process among netwrok goods before standardization takes place
Ex post interventions - public authorities do not try to influence the competition process but safeguard it by controlling firms’ conduct
What is de jure standardization, describe some benefits and disadvantages of it
result of pre-market standardization agreement:
open and transparent procedures based on consensus of all interested parties
may be subject to lobbying and choosing the wrong standard
slow to emerge
competition in short vs long term
discuss cooperative standard setting (de jure)
trade off between long term and short term competition -> impossible to guarentee competition al all stages of the life cycle of a network good
cooperative standard setting for short term competition
Should not be allowed -> standards war would induce an intense ex ante competition while cooperative standard setting would mute it
cooperative standard setting and long term competition
should be allowed - so to have long term competition
standards ware would induce a winner takes all situation, ex ante would allow existance of more than one firm
ex-post interventions via
competition policy
Rather subtle in network markets:
* Natural tendency to market share inequality and high profitability of
a top firm.
* Alleged anticompetitive conduct must be judged against ‘but for’
market structure with significant inequality and profits.
