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A consumer-based model of competitive diffusion: the multiplicative effects of global and local network externalities

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  • Masaki Tomochi
  • Hiroaki Murata
  • Mitsuo Kono

Abstract

Competitive diffusion of two incompatible technologies, such as PC vs. Macintosh, VHS vs. Betamax and so on, is studied under the framework of a spatial game in which consumers are distributed on a two-dimensional square lattice network. The consumers play coordination-like games with their nearest neighbors and imitate the most successful strategy in their neighborhood in terms of aggregated payoffs after each round. The effects of global network externality are realized in the dynamic payoff matrix of the game, and the framework of spatial game provides the model with the effects of local network externality. These two types of externalities are set as multiplicative, that is, as nonlinear. Both simulations and mean-field approximation show that not only total but also partial standardization (robust polymorphic equilibrium) occurs depending upon the parameters and initial configurations, even when there are positive effects of both global and local network externalities. Moreover, effects of innovation factors that alter paths toward a lock-in situation are studied. It is shown that both the timing and the size of the innovation factors matter for a disadvantaged technology in order to overwhelm a market. Copyright Springer-Verlag Berlin/Heidelberg 2005

Suggested Citation

  • Masaki Tomochi & Hiroaki Murata & Mitsuo Kono, 2005. "A consumer-based model of competitive diffusion: the multiplicative effects of global and local network externalities," Journal of Evolutionary Economics, Springer, vol. 15(3), pages 273-295, August.
    • Handle: RePEc:spr:joevec:v:15:y:2005:i:3:p:273-295
    DOI: 10.1007/s00191-005-0245-0
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    Cited by:

    1. Huotari, Pontus & Järvi, Kati & Kortelainen, Samuli & Huhtamäki, Jukka, 2017. "Winner does not take all: Selective attention and local bias in platform-based markets," Technological Forecasting and Social Change, Elsevier, vol. 114(C), pages 313-326.
    2. Kindler, A. & Solomon, S. & Stauffer, D., 2013. "Peer-to-peer and mass communication effect on opinion shifts," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(4), pages 785-796.
    3. Nathalie Lazaric & Vanessa Oltra, 2012. "Sustainable Consumption in an Evolutionary Framework: How to Foster Behavioural Change?," Chapters, in: Blandine Laperche & Nadine Levratto & Dimitri Uzunidis (ed.), Crisis, Innovation and Sustainable Development, chapter 3, Edward Elgar Publishing.
    4. Joachim Henkel & Jörn Block, 2013. "Peer influence in network markets: a theoretical and empirical analysis," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 925-953, November.
    5. Goldenberg, Jacob & Libai, Barak & Muller, Eitan, 2010. "The chilling effects of network externalities," International Journal of Research in Marketing, Elsevier, vol. 27(1), pages 4-15.
    6. Liangjie Zhao & Wenqi Duan, 2014. "Simulating the Evolution of Market Shares: The Effects of Customer Learning and Local Network Externalities," Computational Economics, Springer;Society for Computational Economics, vol. 43(1), pages 53-70, January.
    7. Lina Ma & Wanying Zhao & Longzhu Dong & Yushen Du, 2023. "Platforms Competition: An Ecosystem-View Analysis Based on Evolutionary Game Theory," SAGE Open, , vol. 13(4), pages 21582440231, December.

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