Although we are living in a globalized and networked world, people seldom care about the necessary underlying communication infrastructure and standards. From an economic point of view, the diffusion of network-constitutive standards and their economic impacts are analyzed in countless publications, e.g., for allocation impacts and emerging market structures. Accordingly, the diffusion results of communication standards or standards with network effects in general (none or too many standards, monopolistic dominated markets, etc.) have considerable consequences for the individual but also overall welfare of network participants. However, the question of how such standards can overcome the start-up problem and critical diffusion phase between the market rollout and the critical mass remains unanswered. A fundamental problem of the diffusion of standards and at the same time the reason for the start-up problem is the existence of network externalities: the individually achievable benefit of a communication standard depends on the adoption decision of fur-ther potential network participants. Consequently, the individual benefit is hard to predict, in contrast to the individual costs of adopting a standard.
KeywordsTransaction Cost Network Effect Network Externality Communication Standard Adoption Decision
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