The Analysis Of Compatibility Decision Based On Network Externality

When the value of a product to consumers increases as the number of other users, it says this product with network externality. Such as mobile phones, people will get in touch faster and thus get more utility for each other with users increasing. Compatibility is that the input and the output of different products or systems can be accepted mutually. The network externality is the reason for the existence of compatibility and the compat-ibility is the result of network externality. Generally, network externality and compatibility are studied together.Generally, most scholars pay attention to take what kind of compatible strategy with the incumbent firms facing potential entering, or the potential entrants facing the incumbent companies. Recently, it plays an important role in the compatibility between the incumbent decision problems facing the potential entrants〔8〕. In this paper, it considers the second stage after potential entrants into the market from the view point of game. It es-tablished a two-stage dynamic game model of one decision-making venture and a three-stage dynamic game model of two decision-making ventures with network externality. Especially, there are two large and one small enterprise or three middle enterprises under complete information. It an-alyzes the compatibility strategy and issues related to market share and pricing.There are several main aspects:1. By the improved model (3.1.1), we establish a two-stage dynamic game model of one decision-making enterprise. First, decision-making en-terprise A chooses the compatibility strategy with E; and then three com-panies take part in price competition at the same time. We get sub-game perfect Nash equilibrium, analyze compatibility strategy of the decision-making enterprise A (Conclusion 1) and the impact to the market share (Conclusion 2) and the price.2. By the improved model (3.1.1), we establish a three-stage dynam- ic game model of two decision-making enterprises. First, decision-making enterprise B choose the compatibility strategy with E; Second, decision-making enterprise A chooses the compatibility strategy with E; Third, three companies take part in price competition at the same time. We get sub-game perfect Nash equilibrium, analyze compatibility strategy of the decision-making enterprise A in the subgame (Conclusion 3); and com-patibility strategy of the decision-making enterprise B in the whole game (Conclusion 4); Finally, analyze the impact to the market share (Conclusion 5) and the price strategy(Conclusion 6).In the previous discussion, we considered the fixed size of market, but the market may be different depending on the product, even be uncertain. In fifth chapter, further discussion of two situations with the size of the market:First, the market size is a linear function of the strength of net-work externality as a = 1+3a/t = 1+3T; Second, the market size is uncertain which a is a random variable distributed in [c, d]. We get the expectative equilibrium price, share, profits of each branch in two cases, and get subgame perfect Nash equilibrium, analyze compatibility strategy of the decision-making enterprisers in the whole game.