Standardization, compatibility, and innovation.

Farrell, J., & Saloner, G. (1985). Standardization, compatibility, and innovation. RAND Journal of Economics, 16(1), 70-83.

Type

Journal article

Intellectual base

Primary research

Year

1985

DOI

10.2307/2555589

Link

https://doi.org/10.2307/2555589

Cited from

economics_finance, information_theory

Cited by

3 citations across 3 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Coordination Problem and Equilibrium Selection
  • Once a critical mass adopts one, switching costs prevent recoordination even if alternatives are superior, a dynamic Farrell and Saloner (1985) modeled formally as "excess inertia" in standard-setting under network effects.

    This sourceAnalyzes competing standards under network effects and incomplete information; introduces 'excess inertia' and tipping dynamics in standard-setting, with coordination-vs-innovation welfare trade-offs.

• Network Effect
  • Historical technology-competition cases illustrate this tension: Farrell and Saloner's 1985

    This sourceAnalyzes competing standards and switching costs in network-effects environments; establishes tipping dynamics in standards competition; identifies welfare trade-offs between coordination and innovation.

• Strategic Complementarity
  • Language and standards: each additional speaker of a language or adopter of a standard (USB, HTTP) raises the payoff of further adoption.

    This sourceModels installed-base / adoption-network effects in standard-setting, where each additional adopter of a standard raises the payoff of further adoption — supporting the language/standards instance of complementarity.

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