Solution mechanisms and empirical data
In the previous sections, the implications of the existence of network effects on the decision quality of interdependent agents have been extensively elaborated. For understanding general principles behind standardization processes the framework proposed two extreme institutional settings; one being centralized coordination as a hypothetical benchmark of coordination quality at no agency costs, the other being decentralized coordination with agents acting and reacting according to the ever changing information sets available to them but without engaging in bi- or multilateral deals with their partners so as to accomplish concerted efforts. This gives rise to the question how such activities could contribute to enhancing agents’ decision quality: how can (groups of) agents internalize otherwise unexploited network gains? How to close the standardization gap?
KeywordsNetwork Effect Standardization Problem Side Payment Electronic Data Interchange True Reporting
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