Standardisation and innovation in mobile communication markets: the sequence of technology generations

We study the migration of standards when two companies with their respective proprietary technologies compete on price. It is based on the fact that one of the technologies will be fully developed before the second one, technically more advanced than the first, will have matured to the state of market introduction. We show that it may be worthwhile for the owner and for society to introduce the first technology, provided that set-up costs are low. However, should the owner of the first technology, in order to extract more of the consumers´ surplus, withdraw its technology from the market with the introduction of the second one, a welfare loss will be caused when the set-up costs for the first technology were too high.