Dynamic Duopoly Competition: Network Effects and Customer Switching

本文試圖建構足以呈現行動通信市場主要特色之模型, 藉此研究這些特色對於市場競爭的影響。我們分析爲期三期的Hotelling 雙佔競爭, 此市場具備轉換成本及網路外部性, 後者的強度有一部分爲產品相容性所決定。 當產品僅局部相容時, 消費者將有誘因加入規模較大的網路。爲了搶攻市佔率,廠商競爭更加激烈, 導致價格與利潤降低。因此廠商事前即協議使彼此的產品完全相容, 以減緩日後的競爭。 另一方面, 轉換成本則減低需求彈性。因爲消費者於第二期將受到程度不一的套牢, 廠商在第一期提供優惠的推廣價格, 擴大市佔率以提高未來利潤。在第二期, 廠商依據消費者的購買記錄進行價格歧視, 以較低的價格挖角對手原來的舊客戶。 當廠商可選擇短期或長期合約時, 儘管雙方均販售短期合約時, 利潤較高, 但販售長期合約卻是廠商的優勢策略, 因此他們將陷入囚犯困局中。不過由於長期合約杜絕了會造成無謂損失的轉換行爲, 社會福利可達到最大值。This article aims at building a model that reflects major features of the mobile-telephony industry, enabling us to investigate their implications on competition. We analyze a three-period Hotelling model of duopoly competition in a market subject to switching costs as well as network externalities, the latter of which is partially determined by the level of cross-product compatibility. With partial compatibility, consumers have incentives to join the larger network. Competition for market share becomes more intense, leading to lower prices and profits. Therefore firms agree beforehand to make their products completely compatible to lessen the ensuing price competition. On the other hand, the presence of switching costs makes demands more inelastic. When consumers are locked-in to various degrees in the second period, firms make an introductory price offer in the first period to increase future profits. In the second period, they engage in price discrimination based on consumers’ purchase history, poaching the competitor’s past customers by charging them lower prices. When firms can choose between short- and long-term contracts, they are trapped in the prisoner’s dilemma. Although both firms are better off selling short-term contracts, selling long-term contracts is a dominant strategy for the both of them. Nonetheless, the equilibrium maximizes social welfare because inefficient brand switching does not arise