STANDARD-BEARERS.(The Talk of the Town)

In 1888, at Thomas Edison's laboratory, in West Orange, New Jersey, a macabre event took place. While reporters watched, dogs were placed on a metal plate that had been hooked up to a thousand-volt alternating-current generator and electrocuted one by one. Edison wanted to convince the public that alternating current (which was offered by a competitor, Westinghouse) was too dangerous to be used in the home, and his own direct-current technology should be the national standard for electricity.

Edison's tactics may have been extreme, but his purpose would have been readily understood by the marketers of Sony's Blu-ray technology and those of Toshiba's HD DVDs: both companies are trying to convince us that their product will be the standard high-definition successor to DVDs. Technological standards--like the compact disk, or the protocols that make the Internet function--are essential to the smooth running of a global economy. Yet standards themselves are determined in unstandardized ways. Sometimes they are the product of government mandate. (The European Union wanted one cell-phone standard for the continent, and now virtually all European cell phones use G.S.M. technology.) Sometimes a quasi-governmental organization or a technological consortium steps in, and sometimes deals are cut between companies. But sometimes companies that have spent billions developing new technologies decide to slug it out in the marketplace, just as Edison and Westinghouse did. Such fights are called standards wars--a familiar example is Betamax's defeat by V.H.S.--and the biggest standards war today is the one between Blu-ray and HD DVD.

Standards wars involve lots of variables, and understanding them often seems more an art than a science. They generally involve just two big players, and end in a winner-take-all situation. So whereas Coca-Cola and Pepsi can happily share the soda market, Microsoft Word now has ninety-five per cent of the word-processing market, and WordPerfect has almost none. Thus the rules that govern these wars are different from those of simple free markets.

The most important rule is that, as the economist Hal Varian says, "the product that people expect to win will win." Consumers know that if they back the loser in a standards war they'll be stuck with an obsolete product, so convincing them that your product is a winner is essential. Some economists argue that this means that quality is irrelevant in a standards war, but the historical record suggests that survival of the weakest is a rare occurrence. Betamax fans still extoll its superior picture quality, but for most consumers V.H.S. was the better product; Betamax tapes could fit only an hour's recording time, while V.H.S. could record an entire movie. Similarly, Edison's attempt to make direct current the industry standard failed because alternating ...