Inter-Market Variation in the Rate of New Product Diffusion

This paper examines to what extent diffusion rates systematically vary depend-ing on the type of decision maker involved in adopting the product The superior-ity of producers' information-processing ability is considered as one of the most important qualitative differences between producers and consumers as potential adopters. It is found that the speed of adoption is more rapid for producer goods than for consumer goods. The difference in the rate of adoption can be ex-plained by a more rapidly falling price path and more rapid entry into markets for new producer goods. In order to find out why price falls more rapidly for new producer goods, we estimate the learning curve for producer goods and con-sumer goods. Our analysis shows that learning-by-doing is more extensive for producer goods. Therefore, we conclude that the learning curve is one important source of product diffusion.