Research Article | OPEN ACCESS
How Network Externality and Compatibility Affect the R&D Risk Choices in a Duopoly Market
Mingqing Xing
Department of Economics and Management, Weifang University, Weifang 261061, China
Research Journal of Applied Sciences, Engineering and Technology 2013 23:5430-5434
Received: November 24, 2012 | Accepted: January 17, 2013 | Published: May 28, 2013
Abstract
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 firms’ 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.
Keywords:
Compatibility, hotelling model, network externality, R&D risk, uncertainty,
Competing interests
The authors have no competing interests.
Open Access Policy
This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Copyright
The authors have no competing interests.
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ISSN (Online): 2040-7467
ISSN (Print): 2040-7459 |
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