Technical Standards as Public Goods: Demand Incentives for Cooperative Behavior

Abstract

Technical standards can be viewed as a public good, in that one firm can use a standard without diminishing another firm's use of the standard. Drawingfrom developments in radio and television, this study illustrates the choice of technical standards by manufacturers. From the consumers'perspective, joint use of particular technical standards by firms reduces the likelihood of premature technological obsolescence and increases the quantity of comple mentary goods (broadcasts) available to the owners of receivers. The decision by each firm to choose an identical standard creates compatibility, expanding market demand. Thus the choice of a technical standard by each broadcaster involves an externality.