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A Forecasting Model Incorporating Replacement Purchase: Mobile Handsets in South Korea's Market

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Author Info

  • Jongsu Lee
  • Chul-Yong Lee

    () (Technology Management, Economics and Policy Program(TEMEP), Seoul National University)

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    Abstract

    The paper introduces a replacement forecasting model that operates at the brand level and overcomes limitations of existing models. The model (1) consists of a diffusion model and a time series model; (2) separately identifies the diffusion of first-time purchases and that of replacement purchases; (3) reflects brands¡¯ competitive factors affecting product diffusion; and (4) characterizes consumers¡¯ different replacement cycles.The model is applied to South Korea¡¯s mobile handset market. The model performs well in terms of its fit and forecasting when compared with other forecasting models incorporating replacement and repeat purchases. The usefulness of the model stems from its ability to describe complicated environments and its flexibility in including multiple factors that drive diffusion in the regression analysis.

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    File URL: ftp://147.46.237.98/DP-04.pdf
    File Function: First version, 2009
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    Bibliographic Info

    Paper provided by Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) in its series TEMEP Discussion Papers with number 200904.

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    Length: 22 pages
    Date of creation: Apr 2009
    Date of revision: Apr 2009
    Handle: RePEc:snv:dp2009:200904

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    Related research

    Keywords: Replacement; Diffusion model; Mobile handset market;

    This paper has been announced in the following NEP Reports:

    References

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    1. Kim, Yunhee & Lee, Jeong-Dong & Heshmati, Almas, 2008. "Analysis of Pay Inequality and its Impacts on Growth and Performance in the Korean Manufacturing Industry," IZA Discussion Papers 3774, Institute for the Study of Labor (IZA).
    2. Jehoshua Eliashberg & Abel P. Jeuland, 1986. "The Impact of Competitive Entry in a Developing Market Upon Dynamic Pricing Strategies," Marketing Science, INFORMS, vol. 5(1), pages 20-36.
    3. Joe A. Dodson, Jr. & Eitan Muller, 1978. "Models of New Product Diffusion Through Advertising and Word-of-Mouth," Management Science, INFORMS, vol. 24(15), pages 1568-1578, November.
    4. Gary L. Lilien & Ambar G. Rao & Shlomo Kalish, 1981. "Bayesian Estimation and Control of Detailing Effort in a Repeat Purchase Diffusion Environment," Management Science, INFORMS, vol. 27(5), pages 493-506, May.
    5. Minhi Hahn & Sehoon Park & Lakshman Krishnamurthi & Andris A. Zoltners, 1994. "Analysis of New Product Diffusion Using a Four-Segment Trial-Repeat Model," Marketing Science, INFORMS, vol. 13(3), pages 224-247.
    6. Jun, Duk B. & Kim, Seon K. & Park, Yoon S. & Park, Myoung H. & Wilson, Amy R., 2002. "Forecasting telecommunication service subscribers in substitutive and competitive environments," International Journal of Forecasting, Elsevier, vol. 18(4), pages 561-581.
    7. Tai-Yoo Kim & Almas Heshmati & Jihyun Park, 2009. "Perspectives on the Decelerating Agricultural society," TEMEP Discussion Papers 200901, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jan 2009.
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