Abstract:To reveal the influence mechanisms for manufacturers’ decision-making regarding product quality and retailers’ selection of business objective strategies in market environments with network externalities (NEs), an evolutionary game model is constructed. On this basis, the influences of NEs and variable quality costs (VQCs) on retailers’ evolutionarily stable strategy(ESS) of business objective, the manufacturers’ decision-making for product quality and the profits of enterprises are analyzed. The results show that, when the manufacturer only has part market power, its decisions with regard to product quality are affected by the retailers’ selection of business objective strategies which affected by NEs. When NEs are low, the retailers will take a profit maximisation strategy to prompt manufacturer set a low product quality. When NEs are moderate, the business objective of retailers is evolved to stable co-existence of profit, and revenue, maximization. Under this condition, a moderate product quality would be set by the manufacturer. While when NEs exhibit a high strength, the retailers change the business objective to revenue maximisation strategy and therefore manufacturer set a high product quality. When NEs are at a moderate level, together with VQCs exhibits a cross-effect on the business objective selection of retailers. The retailers’ ESS changes with the decrease of the VQC: either changing from profit maximisation to the mixed strategy, or from the mixed strategy to one of revenue maximisation. The influence of NEs on the product quality of manufacturers is related to VQCs and retailers’ selection of business objectives, which cause an increase in NEs to not always improve product quality.