A welfare analysis of standards competition: The example of the ECMA OpenXML standard and the ISO ODF standard

The paper's objective is the analysis of some of the fundamental economic efficiency considerations of parallel standards, in order to thereby enrich the discussion and also the decision process regarding the transfer of the ECMA OpenXML standard into an ISO standard parallel to the already existing ISO ODF standard, producing rather fundamentals than specific technical aspects and arguments. The following questions are central to the analysis: How should multiple parallel existing standards, which exist in the same technological area, be fundamentally evaluated in terms of theoretical-static welfare, and most importantly with respect to their dynamic effect on innovation and competition? How can these questions be evaluated, in particular in the area of standardisation of open document formats? How is the standardisation of open document formats to be evaluated with respect to their effect on innovation and competition - in particular in the downstream markets and therewith from the point of view of the medium-sized software industry? From a general economic welfare perspective it is superior to select only one specific standard within a static model. In contrast, the much more realistic dynamic models present a set of efficiency improvements generated by a competition between standards, which counterbalance the static efficiency gains caused by an intermediate decision for a specific standard. Based on several economic models a number of parameters are identified that have to be taken into account in the decision for or against a competition between competing standards. If one ultimately summaries the parameter characteristics in the concrete cas of competition between ODF and the OpenXML standard, one clearly finds characteristics in the majority of the parameters that do not speak for an immediate decision for either of the two standards at the current time