There are often benefits to consumers and to firms from standardization of a product. We examine whether these standardization benefits can "trap" an industry in an obsolete or inferior standard when there is a better alternative available. With complete information and identical preferences among firms the answer is "no"; but when information is incomplete this "excess inertia" can occur. The extent to which the problem can be overcome by communication is also discussed.
URL (JSTOR)
URL (Stern School of Business, New York University)
Asymmetric inertia, Compatible products, Network externalities, Symmetric inertia
| Language(s): | English |
| Authors | Farrell, Joseph (GTE Labs and Massachusetts Institute of Technology), Saloner, Garth (Massachusetts Institute of Technolo) |
| Publisher: | Wiley |
| Keywords: | Asymmetric inertia, Compatible products, Network externalities, Symmetric inertia |
| Last update: | 1985 |