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Journal of Economic Perspectives: Vol. 8 No. 2 (Spring 1994)

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Choosing How to Compete: Strategies and Tactics in Standardization

Article Citation

Besen, Stanley M., and Joseph Farrell. 1994. "Choosing How to Compete: Strategies and Tactics in Standardization." Journal of Economic Perspectives, 8(2): 117-131.

DOI: 10.1257/jep.8.2.117

Abstract

In a network industry, each firm must decide whether or not it wants its product to be compatible with those of rivals. This horizontal compatibility strategy determines whether competition is a battle to establish a standard or the more conventional competition within a standard. The two forms of competition involve different tactics and may differ in the extent to which they dissipate industry profits. In some cases, all firms in an industry may prefer the same form of competition. In other cases, firms may prefer different forms of competition and either may prevail.

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Authors

Besen, Stanley M. (Charles River Associates, DC)
Farrell, Joseph (U CA, Berkeley)

JEL Classifications

L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L23: Organization of Production
L13: Oligopoly and Other Imperfect Markets

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