Abstract: The paper builds the merger models for the industrial structures of upstream duopoly with downstream oligopoly and upstream and downstream oligopoly with the characteristic of network externality respectively,and studies the game equilibrium when the firms take the horizontal and vertical merging as the strategy variables.The conclusions show the mode decisions have not been affected by the degree of network externality under the industrial structure of upstream duopoly with downstream oligopoly,but affected by the degree of network under the industrial structure of upstream and downstream duopoly.Furthermore,the paper shows the conflicts of interest between the firms and the government in the merger mode decision.

Key words: network externality, horizontal merger, vertical merger, social welfare