Persuading to participate: Coordination on a standard

Elsevier BV
Publication Type:
Journal Article
International Journal of Industrial Organization, 2021, 78, pp. 102764-102764
Issue Date:
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We study coordination among competitors in the shadow of a market mechanism. Our main example is standard setting: either firms coordinate through a standard-setting organization (SSO), or a market solution—a standards war—emerges. A firms veto to participate in the SSO triggers a standards war. Participation constraints are demanding, and the optimal SSO can involve on-path vetoes. We show that vetoes are effectively deterred if firms can (partially) release their private information to the public. We discuss several business practices that can serve as a signaling device to provide that information and to effectively ensure coordination.
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