Entry into the Complementary Good and Service Markets in a Foreign Country, with Network Effects

Document Type : Research Paper

Authors

1 Ph.D in Economics, Urmia University,

2 Professor of Economics, Urmia University, Iran

Abstract

In this study, we examine entry into complementary good and service markets in a foreign country with network effects. We used a three-stage game theory model which in the first step, the entrant chooses the entry strategy, in the second stage, firms determine the prices by forming a profit function and in the third period, consumers decide which goods to consume. The results show that entry occurs and entrant attract a majority of consumers, if the fixed costs of direct entry are lower than the export fixed costs, the complementary degree is higher than the export variable costs and the network effects are large enough. The entrant can also choose the direct entry strategy by implementing the assumptions which expressed in propositions and captures the foreign market by considering the network effects and large complementary degree.
JEL Classification: D4, L1, C7, F1, P33

Keywords

Main Subjects

References

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Journal of Economic Research (Tahghighat- E- Eghtesadi)
Volume 54, Issue 4 - Serial Number 129
January 2020
Pages 847-873

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History

  • Receive Date: 04 October 2018
  • Revise Date: 01 May 2019
  • Accept Date: 08 October 2019

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