Research on the Structure of the Service Industry under Duopoly Market

After the sale of goods, more and more manufacturers provide product-supplementary services. This paper analyzes the structure of the service industry under duopoly market. The two periods Bertrand Nash game is used to discuss the competition among two manufacturers and one service provider. The two manufacturers can provide similar products and the service provider can only provide the similar product-supplementary service. It shows that the service provider can reduce the entry barriers to consumers and improve consumer welfare. In the short term, the manufacturers can gain more market share by increasing the switch cost. However, in the long run, the method of increasing the switch cost must reduce the motivation for consumers to choose services, which results in the overall market slump. Not only do the service provider lose much market share, but also the two manufacturers.