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Rational incompatibility with international product standards
By : Christopher B. Barrett, Yi-Nung Yang, ELSEVIER (cbb2@cornell.edu (C.B. Barrett), yinyang@ms17.hinet.net (Y.-N. Yang).)
Created : 2010-06-30, with 1 files
Keyword : Rational, incompatibility, international, product, standards
Url : http://www.elsevier.nl / locate /econbase
International product standardization enables traditional, price-based competition. But the
existence of redesign costs or network effects creates market frictions that diminish the
incentive to standardize if there already exists a different technology in an established
market. This leads to multi-attribute competition between products and will generally
reduce trade flows. Not only do incumbent firms using a different technology have an
incentive to deviate from an international standard, but a host country government
concerned for its consumersÂ’ welfare has no incentive to enforce the international standard
and may even value deviation from the international standard through technical barriers to
trade.
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