A Percolation-Based Model Explaining Delayed Take-Off in New-Product Diffusion
AbstractA 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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Date of creation: Apr 2006
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new-product diffusion; innovation adoption; spatial stochastic processes; percolation;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-20 (All new papers)
- NEP-BEC-2006-05-20 (Business Economics)
- NEP-COM-2006-05-20 (Industrial Competition)
- NEP-INO-2006-05-20 (Innovation)
- NEP-TID-2006-05-20 (Technology & Industrial Dynamics)
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