Choosing the Rules for Consensus Standardization

35 Pages Posted: 4 May 2009 Last revised: 7 Sep 2013

See all articles by Joseph Farrell

Joseph Farrell

University of California, Berkeley - Department of Economics

Timothy Simcoe

Boston University - Questrom School of Business; NBER

Date Written: December 8, 2011

Abstract

Consensus standardization often involves bargaining without side payments or substantive compromise, creating a war of attrition that selects through delay. We investigate the trade-off between screening and delay when this process selects for socially valuable but privately observed quality. Immediate random choice may outperform the war of attrition, or vice versa. Allowing an uninformed neutral player to break deadlocks can improve on both mechanisms. Policies that reduce players' vested interest, and hence delays, can strengthen the ex ante incentive to improve proposals.

Keywords: Consensus, Standards, Compatibility, Innovation

JEL Classification: L15, C78, D71, D83

Suggested Citation

Farrell, Joseph and Simcoe, Timothy S., Choosing the Rules for Consensus Standardization (December 8, 2011). RAND Journal of Economics, Vol. 43, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=1396330 or http://dx.doi.org/10.2139/ssrn.1396330

Joseph Farrell

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-9854 (Phone)
510-642-6615 (Fax)

Timothy S. Simcoe (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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