With the continuous iteration of information technology, the level of digitalization has become a key factor in product development for a monopolist, especially in markets with network externality. In this paper, we took a dynamic control approach to investigate a monopolist's digital innovation and product innovation in a market characterized by network externality. The major features of this work are: (ⅰ) A monopolist conducted digital innovation to improve the level of digitalization and product innovation to enhance product quality; (ⅱ) the demand function consisted of price, product quality, digitalization level, and network size; and (ⅲ) the network value function depended on network size and demand. The major findings are as follows: (ⅰ) Regardless of the monopolist decision-making or government regulation, the saddle-point stability of steady-state equilibrium depends on the depreciation rate of product quality and the digitalization level; (ⅱ) price increases with product quality, the level of digitalization, and network size; and (ⅲ) there is always a complementary relationship between the effort for digital innovation and that for product innovation near the steady-state equilibrium. Our findings serve as a valuable addition to the literature on monopolistic digital innovation and product innovation, particularly in the context of network effects.
Citation: Shengbiao Ma, Huiquan Li, Ran Jiang. Digital innovation and product innovation in a monopoly exhibiting network externality: A dynamic analysis[J]. Journal of Industrial and Management Optimization, 2026, 22(5): 2555-2572. doi: 10.3934/jimo.2026093
With the continuous iteration of information technology, the level of digitalization has become a key factor in product development for a monopolist, especially in markets with network externality. In this paper, we took a dynamic control approach to investigate a monopolist's digital innovation and product innovation in a market characterized by network externality. The major features of this work are: (ⅰ) A monopolist conducted digital innovation to improve the level of digitalization and product innovation to enhance product quality; (ⅱ) the demand function consisted of price, product quality, digitalization level, and network size; and (ⅲ) the network value function depended on network size and demand. The major findings are as follows: (ⅰ) Regardless of the monopolist decision-making or government regulation, the saddle-point stability of steady-state equilibrium depends on the depreciation rate of product quality and the digitalization level; (ⅱ) price increases with product quality, the level of digitalization, and network size; and (ⅲ) there is always a complementary relationship between the effort for digital innovation and that for product innovation near the steady-state equilibrium. Our findings serve as a valuable addition to the literature on monopolistic digital innovation and product innovation, particularly in the context of network effects.
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Shengbiao Ma, Huiquan Li, Ran Jiang. Digital innovation and product innovation in a monopoly exhibiting network externality: A dynamic analysis[J]. Journal of Industrial and Management Optimization, 2026, 22(5): 2555-2572. doi: 10.3934/jimo.2026093
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