Article

Evolving Technologies and Standards Regulation

Luis Cabral, and David Salant

Abstract

The EU mandated a single standard for second generation wireless telecommunications, whereas the US allowed several incompatible standards to battle for market share. Motivated by this example, we argue that a single standard leads to a free riding problem, and thus to a significant decrease in marginal incentives for R&D investment. In this context, keeping two separate standards may be a necessary evil to sustain a high level of R&D expenditures. We also provide conditions such that a non-standardization equilibrium is better for consumers and for society as a whole.

Keywords

Standardization; Innovation; Free-riding; Spectrum regulation;

JEL codes

  • L13: Oligopoly and Other Imperfect Markets
  • L51: Economics of Regulation
  • L52: Industrial Policy • Sectoral Planning Methods
  • L96: Telecommunications

Reference

Luis Cabral, and David Salant, Evolving Technologies and Standards Regulation, International Journal of Industrial Organization, vol. 36, September 2014, pp. 48–56.

See also

Published in

International Journal of Industrial Organization, vol. 36, September 2014, pp. 48–56