Standards

Question 1

What is a standard?

Answer 1

A standard is a construct that results from reasoned, collective choices and enables agreement on solutions of reoccurring problems. Also sets specifications to which all elements of products processes, formats and procedures must follow.

Question 2

How can standards be classified?

Answer 2

Product vs non-product (process) standards. Product standard example is the international toy safety standard while a Process standard example are environmental standards It must affect the final use of the product to be considered to the product standard. Products are also differentiated by vertical standards which usually affect a specific industry, and horizontal standards that interest all industries.

Question 3

Which positive role do standards play in the economic activity?

Answer 3

Provide compatibility (boosts international trade) -Provide information to ensure a certain level of quality (e.g. safety standards) -Allow achievement of economies of scale -Solve problems related to market failures (information asymmetry and negative environmental externalities) -> improving coordination among consumers -Favour the competition and reduce the risk for the consumers of not knowing what they are buying

Question 4

Which negative role standards might play?

Answer 4

Can reduce the competition, if a dominant group is able to influence standard setting (depends whether they are set by public or private actors) -Can decrease the product variety -Can appear high costs for society if standardization leads to inferior technologies

Question 5

What does “positive feedback on the demand side” mean? What is the difference between the terms “positive feedback”, “increasing returns on adoption” and “network externalities/ effects”?

Answer 5

Positive feedback result from network externalities -Increasing returns on adoption means that the more people adopt a technology, the more experience is gained ->technology improves (learning by using) All terms mean that customers benefits from adopting of a technology depend on the number of people, who adopted the technology -Direct network effect: each additional user creates benefits for all other users (e.g. internet) -Indirect network effect: network effects are depending on more than one component related to the same technology (e.g. electric cars and charging stations)

Question 6

How does the technology-adoption game work? When do we have excess inertia and excess momentum?

Answer 6

When a superior technology is introduced, the question is whether the new technology will be adopted despite the greater base of the old inferior technology -Excess inertia: users delay the introduction of the new technology because the user must bear the costs for the innovation -> locked in with the inferior technology -Excess momentum: consumers adopt a new inferior technology -> costs of the choice are bear by the users who stick to the old technology