Coordination on Formal vs. De Facto Standards: A Dynamic Approach
Department of Economics Working Paper No. 412
32 Pages Posted: 11 Sep 2000
Date Written: April 5, 2000
Formal standards arise out of deliberations of standards-writing organizations, while de facto standards result from unfettered market processes. Therefore, the former are of a higher quality and legitimacy, but are slower to develop than the latter. To address this trade-off, we analyze a dynamic game where two players choose between one evolving formal standard and one mature de facto standard. The outcome of the game relies on the coordination mechanism used by the players, one the relative value they attach to successful coordination, and on the formal standard's performance at the end of the game.
Keywords: Standardization, negotiation, bandwagon
JEL Classification: C72, D71, L86
Suggested Citation: Suggested Citation