The value of many goods and many social and legal norms and institutions is correlated to the number of people who adopt them, in other words: They exhibit network effects. But while harmonization enhances network benefits, it also diminishes the benefits derived from variety.

In the first part of his study, Volker Simmering introduces an evolutionary game theoretic model in order to investigate how globalization influences the evolution of international standards and he compares the roles of mandatory and voluntary standards. The second part is devoted to the problem of technological progress in networks, and the third one analyzes the resolution of conflicts within international standardization bodies. As a result, he suggests that policy intervention and the presence of adjacent institutional arrangements are likely to improve the performance of network markets, e.g. those for information technology and telecommunication. Since standardization is difficult to enforce its design is, however, not a trivial challenge.

Autorentext
Dr. Volker Simmering promovierte bei Prof. Dr. Manfred J. Holler am Graduiertenkolleg "Recht und Ökonomik" der Universität Hamburg.

Inhalt

1. Introduction.- 2. The Economics of Networks, Compatibility and Standardization: Definitions, Basic Concepts and Insights.- 2.1 The Concept of Network Effects.- 2.2 Basic Problems in Competitive Network Markets.- 2.3 Compatibility, Standardization, Harmonization and Integration.- 2.4 Commitments.- 2.5 Compatibility and Competition.- 2.6 Empirical Evidence of Network Effects.- 3. An Evolutionary Approach to Network Effects and Globalization.- 3.1 Introduction.- 3.2 Review of Selected Literature.- 3.3 The Model Setup.- 3.4 Existence of Equilibria.- 3.5 Social Welfare.- 3.6 Does Globalization Lead to Efficient Harmonization of Standards?.- 3.7 Some Interpretations of the Assumptions.- 3.8 Extension: Double Adoptions Production of Compatibility by Users.- 4. Mandatory or Voluntary Standards?.- 4.1 Introduction.- 4.2 The Effects of Mandatory and Voluntary Standards.- 4.3 The Stability of Variety.- 4.4 Technical Harmonization within the EU.- 4.5 Conclusions.- 5. The Impact of Users' Commitments on Technological Progress in Network Industries.- 5.1 Introduction.- 5.2 Review of Selected Literature.- 5.3 The Model Setup.- 5.4 Equilibria.- 5.5 Welfare Analysis - Commitments and Efficiency of Transition.- 5.6 Should Policy Intervene?.- 5.7Conclusions 161.- Appendix A.- Appendix B.- 6. Voting on Harmonization.- 6.1 Introduction.- 6.2 System Goods, Vertical and Horizontal Compatibility.- 6.3 Majority Voting and Harmonization.- 6.4 Strategic Behavior Under Harmonization Policy.- 6.5 Conclusions.- 7. Summary of Findings.