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A Percolation-Based Model Explaining Delayed Take-Off in New-Product Diffusion

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Author Info
Martin Hohnisch
Sabine Pittnauer
Dietrich Stauffer ()
Abstract

A model of new-product diffusion is proposed in which a site-percolation dynamics represents socially-driven diffusion of knowledge about the product's characteristics in a population of potential buyers. A consumer buys the new product if her valuation of it is not below the price of the product announced by the firm in a given period. Our model attributes the empirical finding of a delayed ``take-off'' of a new product to a drift of the percolation dynamics from a non-percolating regime to a percolating regime. This drift is caused by learning-effects lowering the price of the product, or by network-effects increasing its valuation by consumers, with an increasing number of buyers.

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Publisher Info
Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse9_2006.

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Length: 18
Date of creation: Apr 2006
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Handle: RePEc:bon:bonedp:bgse9_2006

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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Web page: http://www.bgse.uni-bonn.de/index.php?id=494

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Related research
Keywords: new-product diffusion; innovation adoption; spatial stochastic processes; percolation;

Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Allen, Beth, 1982. "Some Stochastic Processes of Interdependent Demand and Technological Diffusion of an Innovation Exhibiting Externalities among Adopters," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 595-608, October. [Downloadable!] (restricted)
  2. David, Paul A. & Olsen, Trond E., 1992. "Technology adoption, learning spillovers, and the optimal duration of patent-based monopolies," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 517-543, December. [Downloadable!] (restricted)
  3. Simon Hall & Mark Walsh & Anthony Yates, . "How do UK companies set prices?," Bank of England working papers 67, Bank of England. [Downloadable!]
  4. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May. [Downloadable!] (restricted)
  5. Silverberg, Gerald & Verspagen, Bart, 2005. "A percolation model of innovation in complex technology spaces," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 225-244, January. [Downloadable!] (restricted)
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  6. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September. [Downloadable!] (restricted)
  7. U. Witt, 2006. "Evolutionary Economics," Papers on Economics and Evolution 2006-05, Max Planck Institute of Economics, Evolutionary Economics Group.
  8. Blinder, Alan S, 1991. "Why Are Prices Sticky? Preliminary Results from an Interview Study," American Economic Review, American Economic Association, vol. 81(2), pages 89-96, May. [Downloadable!] (restricted)
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  9. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Blackwell Publishing, vol. 40(1), pages 55-83, March. [Downloadable!] (restricted)
  10. Richard R Nelson & Alexander Peterhansl & Bhaven Sampat, 2004. "Why and how innovations get adopted: a tale of four models," Industrial and Corporate Change, Oxford University Press, vol. 13(5), pages 679-699, October.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Simona Cantono & Gerald Silverberg, 2008. "A percolation model of eco-innovation diffusion: the relationship between diffusion, learning economies and subsidies," UNU-MERIT Working Paper Series 025, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
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