Persuading to participate: Coordination on a standard |
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| Institution: | 1. Economics Discipline Group, University of Technology Sydney, Australia;2. Department of Eonomics, Universidad Carlos 3 de Madrid, Spain;1. University of Milano, Department of Economics, Management, and Quantitative Methods Via Conservatorio, 7, Milano 20122, Italy;2. Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille AMSE, France;3. CEF.UP, University of Porto, Portugal;1. School of Economics, Sichuan University, No.24 South Section 1, Yihuan Road, Chengdu 610065, China;2. Department of Economics, National University of Singapore, 117570, Singapore;1. University of Bologna, Department of Economics, Piazza Scaravilli 2, Bologna 40126, Italy;2. Lear, Via di Monserrato 48, Rome 00186, Italy;3. Ofcom, Riverside House, 2a Southwark Bridge Road, London SE1 9HA, United Kingdom;4. Deutsches Institut für Wirtschaftsforschung (DIW Berlin), Technische Universität (TU) Berlin, Berlin Centre for Consumer Policies (BCCP), CEPR, and CESIfo. Mohrenstr. 58, Berlin 10117, Germany;5. Lear, Via di Monserrato 48, Rome 00186, Italy;1. Sloan School of Management, Massachusetts Institute of Technology USA;2. Department of Economics and Rotman School of Management University of Toronto Canada;1. Lancaster University Management School, United Kingdom;2. Humboldt-Universität zu Berlin, Germany |
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| Abstract: | 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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