Forking, Fragmentation and Splintering

Although economic theory suggests that markets may “tip” towards a dominant platform or standard, there are many prominent examples of persistent incompatibility, inter-platform competition and standards proliferation. This paper examines the economics of forking, fragmentation and splintering in markets with network effects. We illustrate several causes of mis-coordination, as well as the tools that firms and industries use to fight it, through short cases of standardization in railroad gauges, modems, operating systems, instant messaging and Internet browsers. We conclude by discussing welfare effects of efforts to promote inter-operability