Introduction

Abstract

The first human beings that suffered from a lack of standards might have been the residents of Babel. In order to stop their ambitious attempt to build a tower that reaches the heavens, God made them speak different languages. Since verbal communication proved to be an essential coordination facility in Babel, their project failed disastrously and the people from Babel dispersed throughout the world. This story illustrates an important property that languages possess, which is also shared by many other goods: their “value” is positively correlated to the number of people who adopt the same “goods” — in other words, they exhibit “network effects”. Such adoption externalities play a major role in modern life. The value of an Internet portal, a specific type of music player as well as many social and legal (coordination) norms and other institutions, for example, heavily depends on the (expected) number of people that adopt thesame or compatible “goods”. Since thus, in turn, individuals’ benefits may crucially depend on other players making the same (or a compatible) choice, the evolution of standards is of vital importance in these areas.