Do incompatible network standards lead to domestic benefits? The case of color television

Sheoli Pargal

1/01/2005
(Original Publish Date: 1996)

This paper examines the strategic use of standardization policy to give domestic firms and technology sellers an advantage, especially when competing for foreign markets. Can the imposition of a standard in the domestic market that is incompatible with the incumbent standard be beneficial to domestic firms or consumers? The development of color television standards in Europe provides the basis for the study. The paper uses simulations and a single game theoretic framework to examine whether the choice of an incompatible color standard in France could be justified as creating a protected market for domestically headquartered firms and allowing them to establish strong competitive positions in foreign markets.