PATENT RACES, PRODUCT STANDARDS, AND INTERNATIONAL COMPETITION

We examine anticipatory product standards intended to improve the stra tegic position of firms in an international patent race where firms do R&D to develop products that are close substitutes. The effects of a standard depend on the way the standard is specified, which firm devel ops which product, and the order of discovery. Simple standards can be time inconsistent because of consumer losses that occur when products ruled out by the standard are discovered first. A state-contingent st andard is shown to be time consistent when compulsory licensing by the foreign firm is introduced.