TY - JOUR
T1 - Compatibility strategies for an asymmetric duopoly considering network effects and market shares
AU - Tseng, Fan Chen
AU - Wang, Kuang Cheng Andy
PY - 2011/12
Y1 - 2011/12
N2 - The network effect is a key factor influencing the development of e-business and technological innovation. At the same time, compatibility decisions can determine the success or failure of businesses and technologies. This study explores the compatibility strategies in the context of network effects using a two-stage game-theoretical model for a duopoly. In the first stage, two firms make their compatibility decisions, and in the second stage, two firms are engaged in Bertrand price competition. Major findings are (1) other things being fixed, two firms are more likely to be compatible with each other when they have similar market shares, (2) the compatibility decisions of firms will not be influenced by consumers' switching costs, (3) the order of their compatibility decisions will not change the resulting equilibrium, and (4) based on firms' compatibility decisions, the Bertrand price competition may still lead to market failure, necessitating governmental intervention or regulations.
AB - The network effect is a key factor influencing the development of e-business and technological innovation. At the same time, compatibility decisions can determine the success or failure of businesses and technologies. This study explores the compatibility strategies in the context of network effects using a two-stage game-theoretical model for a duopoly. In the first stage, two firms make their compatibility decisions, and in the second stage, two firms are engaged in Bertrand price competition. Major findings are (1) other things being fixed, two firms are more likely to be compatible with each other when they have similar market shares, (2) the compatibility decisions of firms will not be influenced by consumers' switching costs, (3) the order of their compatibility decisions will not change the resulting equilibrium, and (4) based on firms' compatibility decisions, the Bertrand price competition may still lead to market failure, necessitating governmental intervention or regulations.
KW - Compatibility
KW - network effect
KW - switching cost
KW - undercut-proof equilibrium
UR - http://www.scopus.com/inward/record.url?scp=84896300676&partnerID=8YFLogxK
U2 - 10.1142/S0219877011002581
DO - 10.1142/S0219877011002581
M3 - 文章
AN - SCOPUS:84896300676
SN - 0219-8770
VL - 8
SP - 615
EP - 634
JO - International Journal of Innovation and Technology Management
JF - International Journal of Innovation and Technology Management
IS - 4
ER -