Supply decisions and competitions in financial innovation process

To make an analysis of supply decision-making in financial innovation process which is treated as a system, this paper at first develops a duopoly model that focuses on incentives the new products bring to the supply agents. The positive externality and some kinds of the equilibrium are discussed, which show that the leader (innovator), comparing to the follower (imitator), has monopoly advantage but also information disadvantage. Then, in a system setting which has multiple stages and more agents, the profit flows and decision problems of the agents are modeled and analyzed. The results show that the leader acquires larger market share than the followers.