Game Analysis And Differentiation Strategy In Bank Market Based On Hotelling Model

The main purpose of this paper is to demonstrate that differentiation strategy basedon Hotelling model will be of significance to banking industry in online business. Firstlyproduct differentiation theory is introduced, which comes from the theory of industrialorganization. Secondly, classic Hotelling model is further extended by adding IT elements.And then based on extended model, it is demonstrated the inevitability of implementingdifferentiation strategy for online bank. Finally, in accordance with the current situationfor online bank, this paper analyses the inadequacies existed and suggests relevantapproaches to improvement.In this paper, game theory method is used to demonstrate the necessity ofdifferentiation strategy for online bank. Benefited from Hotelling model decomposed intoa two-stage perfect information static game, backward induction method is used forsolving the game balance.This paper has two innovations. One is that classic Hotelling model is furtherextended by adding IT elements. And another is that it is demonstrated the inevitability ofimplementing differentiation strategy for online bank.The results of this research have some theoretical significance and practicalsignificance. In theory, the model content is further enriched and developed discussion onextended Hotelling model. Reality, under the impact of online banking the research on thegame competition of banking market, as well as facing the Current Situation of China’sonline information technology-based differentiation strategy for the future development ofour online banking has got reference value.