The Game Analysis of Firms' R&D Decisions in Markets with Multihoming

Using complete information game models,we study firms' RD decisions and innovation incentives when there are multihoming consumers in markets with network externalities,and examine the effect of the proportion of multihoming and intensity of network externality on the level of RD.As considering multihoming behavior in the markets,the equilibrium results show that:(i)Firms have incentives to choose RD;(ii)The firm which chooses RD will set higher prices,gain bigger demands and more profits than the one which isn't in equilibrium;(iii) The bigger the proportion of the multihoming consumer,the higher the level of RD in the case of the differentiation parameter and the investing parameter being big enough.At last,a numerical example indicates that the aggregate consumer surplus and aggregate social welfare when exist RD in the market is higher than those in the opposite case.