Standards Battles and Public Policy

Luis Cabral, and Tobias Kretschmer

1/01/2005
(Original Publish Date: 2004)

We examine the effectiveness of public policy in a context of competing standards with network externalities. We show that, if the policymaker is very impatient, then it is optimal to support the leading standard; whereas, if the policymaker is very patient, then it is optimal to support the lagging standard. We also consider the timing for optimal intervention and provide suffcient conditions under which it is optimal to delay or not to delay intervention.