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Choosing How to Compete: Strategies and Tactics in Standardization

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  • Stanley M. Besen
  • Joseph Farrell

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.

Suggested Citation

  • Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
    • Handle: RePEc:aea:jecper:v:8:y:1994:i:2:p:117-31
    Note: DOI: 10.1257/jep.8.2.117
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.8.2.117
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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