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2013 (Vol. 5, Issue: 23)
Article Information:

How Network Externality and Compatibility Affect the R&D Risk Choices in a Duopoly Market

Mingqing Xing
Corresponding Author:  Mingqing Xing 

Key words:  Compatibility, hotelling model, network externality, R&D risk, uncertainty , ,
Vol. 5 , (23): 5430-5434
Submitted Accepted Published
November 24, 2012 January 17, 2013 May 28, 2013

This study develops a duopoly model describing the optimal choice of R&D risk among R&D projects with the same expected outcome in a market exhibiting network externalities. It demonstrates that, when firmsí product is incompatible, the level of R&D risk increases in the intensity of network externality. However, when product is compatible, the impact of network externality on the R&D risk choices depends on the degree of market coverage. Moreover, firms carry on higher (resp. lower) risk R&D project when their product is incompatible than compatible in a full-coverage (resp. partial-coverage) market.
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  Cite this Reference:
Mingqing Xing, 2013. How Network Externality and Compatibility Affect the R&D Risk Choices in a Duopoly Market.  Research Journal of Applied Sciences, Engineering and Technology, 5(23): 5430-5434.
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ISSN (Online):  2040-7467
ISSN (Print):   2040-7459
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