Alliance Formation in Standard Setting

Heide Coenen, Institute of SocioEconomics, University of Hamburg., and Jörg Gröndahl, Institute of SocioEconomics, University of Hamburg.

3/03/2008
(Original Publish Date: 3/1/2006)

We present a theoretical framework to describe coalition formation in standardisation alliances, combining different strands of standardisation literature about alliances and incentives to participation. Applying the game-theoretic concept of the core we discuss conditions for stable coalitions and calculate expected payoffs from a private good perspective by means of the Shapley value. Paying attention to the public good character of standards we apply the Holler value which accounts for non-rivalry and non-excludability. Given the characteristic function of the coalition formation game, the emergence of different alliances can be explained. We provide examples in which the technological flexibility of resources shapes the payoffs and thus the resulting standard.