Hotelling model with network externality and linear transportation cost functions is analyzed. Two firms, providing network products, play a two-stage dynamic game with perfect information. Firstly, they simultaneously choose their location, then they compete in price. The conditions for equilibrium price are obtained. One customer＇ s utility is dependent on the others＇ products choice because of network externality. Customer choice determines the market share of network products. Meanwhile the market share reversely influences customer choice. By using of transportation flow distribution and infinite dimensional variational inequality method, the market share model of network products, i. e. infinite dimensional variational inequality, is set up. Its existence and uniqueness is studied. Finally, the influence of network externality character and unit transportation cost on the firms＇ competition equilibrium is analyzed under the assumption that two firms choose the location at the two ends