A Study On The Double Purchase Of Products With Network Externalities

Network externalities reflect the essential characteristic of network economy which make the competition among companies that provide network goods present some new characteristics and laws in its contents and forms. The thesis mainly discusses the influence of consumer's double purchase ability on firms' marketing strategies and compatibility choice in the market with network externalities. The thesis also discusses the reason and the meaning of the emergence of dual-mode product in the process of technical progress.Using the undercut-proof equilibrium model, the thesis constructs a model base on the double purchase of products with network externalities. Firstly, the thesis analyses the model of duopoly one-sided market and finds out that when the products are incompatible, with the share of double purchase consumers increasing, the competition between the two firms is weakened gradually, and the price and profit increases. So the firms are more likely to make their products or services incompatible. However, the welfare of consumers becomes worse with the share of double purchase consumers increasing. Besides, the thesis also extends the model of one-sided market to the case of two-sided markets and finds that when platforms provided by two competitive firms are incompatible, the existence of double purchase of either side will increase the price and profit of both sides and decreases two firms' desire of compatibility.Finally, the thesis constructs a model base on the double purchase of innovation products with network externalities and finds that in the process of radical technology progress the reason of the emergence of dual-mode product is caused by the consumers' desire of double purchase. The thesis also finds that in some certain conditions, the emergence of dual-mode product may benefit the old and the new technology supplier simultaneously.