Abstract: This paper analyzes the dynamic pricing decision of a duopolistic marketing,a new product or service whose consumption value increases with the expansion of the "network" of adopters. We characterize an optimal pricing strategy,which maximizes the present value of the duopolistic profits,subject to the dynamics of the demand for network access. The dynamics depends,among other factors,on the current price and consumer anticipations about future network growth. We examine the effects of changes in the growth anticipations and the discount rate on the optimal equilibrium access price and network size. It is shown that higher growth anticipations and a lower discount rate result in a lower equilibrium price and a larger network,which is similar to the monopolist marketing.

Key words: dynamic pricing, duopolistic marketing, network externalities, differential game, open-loop Nash equilibrium