Origins
Lionel dubbed its new standard Standard Gauge and trademarked the name. Lionel's Standard Gauge should not be confused with standard gauge for real railroads, or the later 1:64 scale S gauge popularized by American Flyer after World War II. Due to the trademark, Lionel's competitors mostly called their similar offerings Wide Gauge.
Historians disagreed on Lionel's reason for creating Standard Gauge, giving two stories. One story is that Lionel misread the specifications for Märklin's European Gauge 2, measuring the distance between the inside portion of the rails rather than between the centers of the rails as Märklin did, thus accidentally making a slightly larger and incompatible standard. The other story is that the change was a deliberate effort to lock out European competition by creating incompatible trains. While many believe the latter is more likely, since several U.S. companies such as Carlisle & Finch were producing trains to that standard, no definitive proof in favor of either theory has ever surfaced.
It is argued if Standard Gauge production began in 1906 or 1907. A Lionel catalog exists showing Standard Gauge with a post mark that appears to indicate 1906 however most collectors feel that production did not begin until 1907 believing that Lionel manufactured their 2 7/8 inch gauge line in 1906.
Read more about this topic: Wide Gauge
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