Alliance formation in standard setting

Abstract

We analyse coalition formation in standardisation alliances, combining different strands ofstandardisation literature about alliances and incentives to participatiorL Applying the game-theoretic concept of the core we discuss conditions for stable coalitions. For calculating expected payoffs we apply the Shapley value that coincides (for given conflict payoffs) with the Nash-bargaining solution, which is generally acceped as a fair and reasonable solution to bargaining problems. The discussion of the goods character of standards leads to the application of the Holler value which was designed for public goods and does not depend on the grand coaliton being the efficient outcome. Given the characteristic function of the coaliton formation game, the emergence of different alliances can be explained. We provide examples in which the technologicalflexibility of resources shapes the payoffs and thus the resulting standard.