Bertrand Competition in Markets With Network Effects and Switching Costs

This paper analyzes duopoly competition at the market with network effects and switching costs. The paper find that the evolution of the firms' market shares depends on the single parameter which measures the relative importance of the switching costs coefficient compared to the network effects coefficient. Apart from the known dynamics of the firms' market shares in which the difference between the firms' market shares decreases in every period one also get "Monotone monopoly outcome" and "Alternative monopoly outcome" in which the difference between the firms'market shares increases in every period with the dominant firm keeping its position in the former case and loosing in the latter.