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... We argue that this splitting fostered confusion about which technology would emerge as a standard -i.e., widespread splitting interfered with emergence of a technical focal point for market participants -which further deterred adoption decisions. In this sense our discussion, based on the theory in Rysman (2003a), is also a contribution because it differs from the common explanation. Rather, we observe behavior that appears consistent with inefficient incentives to differentiate across standards. ...
... However, this market failed to standardize without the intervention of a standard-setting organization. The result that ISP's differentiated across markets is consistent with our theory (formalized in Rysman, 2003a) that competitive differentiation across standards caused consumers to delay their adoption, and ultimately necessitated the intervention of the standard-setting organization. More broadly, the competitive environment of service providers may be an important determinant in the success or failure of a standards war, a previously overlooked issue by researchers, policy makers and private-sector managers. ...
... etwork. They rely on consumer heterogeneity but Church and Gandal specifically note the inefficient incentives of software providers to differentiate across standards.Ellison and Fudenberg (2002) indentify a similar issue in a more general setting and with homogenous standards. All three of these papers study static games where all consumers adopt.Rysman (2003a) shows in a dynamic game that the choice between standards can lead consumers to delay adoption, a particularly inefficient result. cable modems) that they gave up on in 1998 in favor of 56K modems. We find these hypotheses implausible.We believe that most compelling alternative explanation is that market participants were waiting for th ...
56K modems were introduced under two competing incompatible standards. We show the importance of competition between Internet Service Providers in the adoption process. We show that ISP's were less likely to adopt the technology that more competitors adopted. This result is particularly striking given that industry participants expected coordination on one standard or the other. We speculate about the role of ISP differentiation in preventing the market from achieving standardization until a government organization intervened.
... We argue that this splitting fostered confusion about which technology would emerge as a standard -i.e., widespread splitting interfered with emergence of a technical focal point for market participants -which further deterred adoption decisions. In this sense our discussion, based on the theory in Rysman (2003a), is also a contribution because it differs from the common explanation. Rather, we observe behavior that appears consistent with inefficient incentives to differentiate across standards. ...
... However, this market failed to standardize without the intervention of a standard-setting organization. The result that ISP's differentiated across markets is consistent with our theory (formalized in Rysman, 2003a) that competitive differentiation across standards caused consumers to delay their adoption, and ultimately necessitated the intervention of the standard-setting organization. More broadly, the competitive environment of service providers may be an important determinant in the success or failure of a standards war, a previously overlooked issue by researchers, policy makers and private-sector managers. ...
... etwork. They rely on consumer heterogeneity but Church and Gandal specifically note the inefficient incentives of software providers to differentiate across standards.Ellison and Fudenberg (2002) indentify a similar issue in a more general setting and with homogenous standards. All three of these papers study static games where all consumers adopt.Rysman (2003a) shows in a dynamic game that the choice between standards can lead consumers to delay adoption, a particularly inefficient result. cable modems) that they gave up on in 1998 in favor of 56K modems. We find these hypotheses implausible.We believe that most compelling alternative explanation is that market participants were waiting for th ...
56K modems were introduced under two competing incompatible standards. We show the importance of competition between internet service providers in the adoption process. We show that ISPs were less likely to adopt the technology that more competitors adopted. This result is particularly striking given that industry participants expected coordination on one standard or the other. We speculate about the role of ISP differentiation in preventing the market from achieving standardization until a standard setting organization intervened.
... Even without a preference for variety, it still can be true that consumers attract ISPs and ISPs attract consumers. Rysman (2003) provides an example of this. ...
In an effort to produce interoperable products, firms frequently participate in Standard Setting Organizations (SSOs) to collaboratively set technical standards for products used by networks of consumers. Some SSO members say they suffer from a type of holdup: after they sink technology-specific investments in developing and implementing a standard using a particular patented technology the patent owner can set licensing terms that exploit those investments. These members have called on SSOs to enhance competition between patent owners by soliciting and considering licensing terms for competing technologies ex ante, before anointing one as "the standard." However, more competitive licensing terms may dampen incentives to innovate. This paper analyzes the balance between the welfare benefits of the added competition and the welfare costs of reduced innovation. The model of R&D investment and standard setting predicts that both total welfare and consumer welfare are higher when an SSO considered licensing terms ex ante as long as the cost of innovation is not "high." The model also predicts that the welfare benefits of ex ante consideration of licensing terms grow as the costs of innovation falls. However, when the cost of innovation is "high" the negative welfare effects are always small.
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