TY - JOUR
T1 - Sequential product positioning in the presence of an asymmetric network externality intensity
AU - Saito, Ryoichi
AU - Matsubayashi, Nobuo
N1 - Funding Information:
Grants-in-Aid for Scientific Research (C), Grant/Award Number: 15K01202; Ministry of Education, Culture, Sports, Science and Technology of Japan
Publisher Copyright:
Copyright © 2017 John Wiley & Sons, Ltd.
PY - 2018/4
Y1 - 2018/4
N2 - In this study, we analyze the sequential decisions on product positioning of two firms in the presence of network externalities. One commonly accepted phenomena in a market where a network externality arises is the first-mover advantage, in which the first entrant into a market can earn a higher profit than later entrants. However, in some recent online services markets, we see that the second mover earns a higher profit than the first mover. This occurs because the second mover strengthens its variety of available functions and services markedly, thereby facilitating consumers' work and communication with its main product, which we call network externality intensity. Based on this observation, we analyze sequential positioning in Hotelling's framework by incorporating an asymmetric network externality intensity between firms. We show that unlike the results of previous related studies, both first- and second-mover advantages can appear in the equilibrium depending on the relationship of the network externality intensity between firms; further, they do not change monotonically with the level of network externality intensity.
AB - In this study, we analyze the sequential decisions on product positioning of two firms in the presence of network externalities. One commonly accepted phenomena in a market where a network externality arises is the first-mover advantage, in which the first entrant into a market can earn a higher profit than later entrants. However, in some recent online services markets, we see that the second mover earns a higher profit than the first mover. This occurs because the second mover strengthens its variety of available functions and services markedly, thereby facilitating consumers' work and communication with its main product, which we call network externality intensity. Based on this observation, we analyze sequential positioning in Hotelling's framework by incorporating an asymmetric network externality intensity between firms. We show that unlike the results of previous related studies, both first- and second-mover advantages can appear in the equilibrium depending on the relationship of the network externality intensity between firms; further, they do not change monotonically with the level of network externality intensity.
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U2 - 10.1002/mde.2906
DO - 10.1002/mde.2906
M3 - Article
AN - SCOPUS:85042630617
VL - 39
SP - 320
EP - 334
JO - Managerial and Decision Economics
JF - Managerial and Decision Economics
SN - 0143-6570
IS - 3
ER -