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Economics of Information Technology

Economics of Information Technology

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Published by Aaron Merrill

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Published by: Aaron Merrill on Dec 04, 2009
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Sometime standards are negotiated under the oversight of official stan-

dards bodies, such as the International Telecommunications Union (ITU),

the American National Standards Institute (ANSI), the Internet Engineer-

ing Task Force (IETF), or any of dozens of other standards-setting bodies.

These bodies have the advantage of experience and authority; however, they

tend to be rather slow moving. In recent years, there have been many ad

hoc standards bodies that have been formed to create a single standard. The

standards chosen by these ad hoc groups may not be as good as with the tra-

ditional bodies, but they are often developed much more quickly. See Libicki

et al. (2000) for a description of standards setting involving the Internet and


Of course, there is often considerable mistrust in standards negotiation,

and for good reason. Typically participating firms are required to disclose any

technologies for which they own intellectual property that may be relevant to

the negotiations. Such technologies may eventually be incorporated into the

final standard, but only after reaching agreements that they will be licensed

on “fair, reasonable, and non-discriminatory terms.” But it is not uncommon

to see companies fail to disclose all relevant information in such negotiations,

leading to accusations of breach of faith or legal suits.

Another commonly-used tactic is for firms to cede the control of a stan-

dard to an independent third party, such as one of the bodies mentioned

above. Microsoft has recently developed a computer language called C#

that it hopes will be a competitor to Java. They have submitted the lan-

guage the ECMA, a computer industry standards body based in Switzerland.

Microsoft correctly realized that in order to convince anyone to code in C#



they would have to relinquish control over the language.

However, the extent to which they have actually released control is still

unclear. Babcock (2001) reports that there may be blocking patents on

aspects of C#, and ECMA does not require prior disclosure of such patents,

as long as Microsoft is willing to license them on non-discriminatory terms.

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