Does Standardization Really Increase Production?
In market structures with network externalities, it is often asserted that there is a natural tendency toward standardization. In this paper it is argued that incompatible products may survive in static models. Like Katz and Shapiro , I develop a simple multi-product oligopoly in which the demand for one of these commodities increases with the number of agents consuming this good. Instead I introduce a variety of cost functions and discuss the limitations of their results of Katz and Shapiro and exhibit an example that reverses their conclusions.
KeywordsCost Function Production Level Market Structure Network Externality Natural Tendency
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