Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Wednesday, August 20, 2008

Evolving Technologies and Standards Regulation

Posted by D. Daniel Sokol

Luis M.B. Cabral, Leonard N. Stern School of Business - Department of Economics and David J. Salant, Columbia University - Columbia Institute for Tele Information, discuss Evolving Technologies and Standards Regulation in their latest working paper.

ABSTRACT: Spectrum regulation necessarily involves some regulation of the technology that licensees can use. One commonly stated assertion is that a mandated single standard, the solution followed by the EU for 2G wireless, is a successful model for spectrum regulation. We argue that a single standard leads to a free riding problem, and thus to a significant decrease in marginal incentives for R&D investment. In this context, keeping two separate standards may be a necessary evil to sustain a high level of R&D expenditures. We also provide conditions such that a non-standardization equilibrium is better for consumers and for society as a whole.

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