Coordination on Formal vs. De Facto Standards: A Dynamic Approach

Department of Economics Working Paper No. 412

32 Pages Posted: 11 Sep 2000

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 5, 2000

Abstract

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

Belleflamme, Paul, Coordination on Formal vs. De Facto Standards: A Dynamic Approach (April 5, 2000). Department of Economics Working Paper No. 412. Available at SSRN: https://ssrn.com/abstract=235768 or http://dx.doi.org/10.2139/ssrn.235768

Paul Belleflamme (Contact Author)

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