The Hotelling Model Of The Effect Of The Search Cost Of Consumers On Producers

The search cost increasing declined with the using of information technology. The methods of the goods'production ,distribution and consumption have changed. The information goods displayed more and more network externalities. On the condition of the network, the search cost of the customers will change. The change will be advantage or be disadvantage to the producers. Moreover, due to the network externalities that the information goods displayed, the producers have to take into account the influence of these important factors when they set up their install base There is a well developed literature about customer search cost since Stigelar. But there have less study in producer actions when the search cost declined when there have network externalities. So, this paper choice the question that the producer act by the customers search cost when there have network externalities This paper makes use of the Hotelling Model. We classify the customer search cost into fixed search cost and variable search cost. By constituted the model, we study the change of the equilibrium when the two type of the customer search cost changed and when there have network externalities, and simply state the producer how to meet these changes. At last, we study the effect which brought by the two type of search costs reduced when the producer choice compatibility. The innovation in this paper is: (1)This paper design the Hotelling model that the entrant is face of the customer search cost. This model explained successfully the incumbent can acquire more profit than competitor by lower search cost which caused by get into market earlier than competitor. But with the entrant reduces the search cost, the predominance of the incumbent may weaken slowly. So we can see often there are many advertisement when the producer put the new product into the market. (2)In view of the fixed search cost and the variable search cost that the customer take, the paper design the search cost Hotelling model under the condition of the incompatibility. This model explained successfully under the different network externalities, when the producer reduce the customer search cost , how to change about the price,demand and profit .as well as why there are some producers intent to reduce the customer search cost while the price ,demand and profit will reduce when some producers to do so. The producers can increase the margin of the search cost by setup different search cost to the same product, which can get more total profit. (3)In view of the choice of the compatibility that can put down the search cost, the paper design the compatible producers endogenous search cost Hotelling model. This model explained successfully why the producers choose all compatible at some condition but incompatible at other condition. Thereby the market display compatible to compatible or incompatible to compatible or incompatible to incompatible In all, the producers must pay attention to the strategic choice under the network externalities. Based on the market condition oneself, to use the advantage of the search cost and to avoid the disadvantage.