Price versus quantity in a duopoly with network externalities under active and passive expectations

Abstract

This study examines the endogenous choice of strategic contracts in a duopoly composed of firms that produce goods with network externalities with some sort of compatibility. We adopt two types of expectations-active and passive-as consumers' expectations for each firm's equilibrium market share. In addition, we take into account the managerial case and entrepreneurial case with and without separation between ownership and management, as firms' internal structures. We derive the properties in the Cournot competition and the Bertrand competition as the equilibrium market structures under both passive and active expectations under imperfectly compatibility of networks.