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Buffl
Buffl
Economics of technical change

04_Standardization and competition

PI
von Paul I.

What is the postive role of standards in the economic activity?


What is the negative role of standards in the economic activity?


Define standard

Standard is “…a construct that results from reasoned, collective choice and enables agreement on solutions of recurrent problems…a set of specifications to which all elements of products, processes, formats or procedures under its jurisdiction must conform.”

Definie standardization


What are drawbacks (Nachteile) of standards?


In the example of the service sectors, what led to a rejection of standards? What led to the ISO 9000?

  • Problems related to the formalization of services (high degree of individualization, recent trend of mass-customization) and associated technocratic paradigm lead to reluctance to standardize.

BUT:

  • Higher need for services due to decreasing labor intensity, decreasing customization, lower direct customer interaction

  • ISO 9000 series: quality standards -> innovative service companie


How do you calculate the critical mass on joining an economic unit in the technolog T with network externalities? And what is the ciritical mass mass after the transition to new technology?


Which classifications of standards exists?


What functions do standards have?


What do we mean by „systemic character (aspects) of standards“?


What does “positive feedback on the demand side” mean? What is the difference between the terms „positive feedback“, „increasing returns on adoption“ and „network externalities/effects“?


What approaches for firms exists to choose productive technologies?


Explain the process of the static approach.

Technology-adoption game

  • NASH-Equilibria (Options)

    • (Old, Old) played BUT

    • (New, New) pareto dominates -> excess inertia

      • Economy is locked in with an inferior technology

      • Because users have to bear the costs


    • (New, New): played BUT

      (Old, Old): Pareto dominate-> excess momentum

      • Because consumer rush to adopt an inferior technology

      • Costs bear by the users who stick to old technology


When and why are we often locked in with an inferior technology?

  • Excess inertia

    • users delay adopting a new technology ((OLD,OLD) is the played Nash equilibrium but the outcome (NEW,NEW) is characterized by higher utility). It describes the situation in which the economy is locked in with an inferior technology. This situation arises when the new users have to bear the costs of innovating (because of the presence of positive externalities).


Show the Nash Equilibria for

  • an excess inertia

  • an excess momentum


  • excess inertia

  • excess momentum


Explain the process of the dynamic approach.

Focus on factors affecting timing and frequency of adoption

  • Consumer: substitution between more advanced tech. & network size

  • Techn. growth rate & consumer population size

  • degree of compatible: old & new tech.

  • example: chip industrie

  • adapting:

    • young consumers

    • gain utility from first consumption


When competing technologies are in the market, which scenarios can occur?

  • Technological Monopolies vs. Market sharing


What are the dynamics of adoption of different technologies competing for the same market niche?

Answer relies on POSITIVE FEEDBACKS on the DEMAND SIDE.

= network externalities/effects


How does the standard class of models explains the dynamics of adoption of competing technologies?


How does the Bassanini and Dosi explain the dynamics of adoption of competing technologies? Give an example.


Explain the effect of positive feedback on the adoption and give an example


Which government incentives exists to recognize foreign standards in the presence of international network effects?


Give two expamples for effects of specific types of standards on trade.

  • Effect of compatibility standards on international trade

    • allow capturing international network externalities or coordinate activities in a more efficient way

  • Effects on safety standards on international trade

    • not design with the purpose of acting as a protectionsim device

    • consumers’ williningess to pay (WTP) for safer products

  • Effect of environment-related standards


Explain the Effects of specific types of standards on trade


Explain the Effects of specific types of standards on trade


Explain the Effect of environment-related standards on trade


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Paul I.

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