Problem Definition: Thanks to the ubiquity of social media and the new business model of live-streaming e-commerce, online retailing has recently embraced increasing interactions among customers. Such interactions give rise to strong network effects, i.e., customers are attracted to purchase the products with higher sales, and raise a crucial challenge for competing retailers: current operations decisions (such as promotion, price, and inventory) impact not only the current market, but also the future demands and profits of all the retailers through the network effects. To understand the implications of such network effects, we study a dynamic competition model, in which retailers periodically compete on promotional effort (e.g., advertising) and price, while operating their inventories over a finite planning horizon. Methodology/Results: We find that, under the Markov perfect equilibrium, the state space of each firm is linearly separable for both the simultaneous (promotion, price, and inventory) competition and the promotion-first competition, which leads to a simple characterization of the equilibrium strategy in both competitions. The equilibrium characterization also enables us to investigate the impact of the network effects, and to compare the equilibria under the different competition modes. Managerial Implications: The network effects give rise to a natural trade-off between generating current profits and inducing future demands for competing retailers, thus having several important implications upon their operations decisions. The trade-off between current profits and future demands is more intensive at an earlier stage than at later stages, so the equilibrium prices are increasing, whereas the equilibrium promotional efforts are decreasing, over the planning horizon. The retailers need to balance the aforementioned trade-off inter-temporally under the simultaneous competition, whereas they need to balance this trade-off both inter-temporally and intra-temporally under the promotion-first competition. Finally, in the dynamic game between online retailers, the network effects could be a new driving force for the ``fat-cat" effect, i.e., the equilibrium promotional efforts are higher under the promotion-first competition than those under the simultaneous competition
