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

  • Martin Hohnisch
  • Sabine Pittnauer
  • Dietrich Stauffer

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    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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    File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse9_2006.pdf
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    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
    Date of revision:
    Handle: RePEc:bon:bonedp:bgse9_2006
    Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
    Fax: +49 228 73 6884
    Web page: http://www.bgse.uni-bonn.de

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    1. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
    2. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
    3. Simon Hall & Mark Walsh & Anthony Yates, 1997. "How do UK companies set prices?," Bank of England working papers 67, Bank of England.
    4. 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.
    5. Gerald Silverberg & Bart Verspagen, 2002. "A Percolation Model of Innovation in Complex Technology Spaces," Computing in Economics and Finance 2002 24, Society for Computational Economics.
    6. Ulrich Witt, 2006. "Evolutionary Economics," Papers on Economics and Evolution 2006-05, Philipps University Marburg, Department of Geography.
    7. Goldenberg, J & Libai, B & Solomon, S & Jan, N & Stauffer, D, 2000. "Marketing percolation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 284(1), pages 335-347.
    8. 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.
    9. Vijay Mahajan & Eitan Muller & Frank M. Bass, 1995. "Diffusion of New Products: Empirical Generalizations and Managerial Uses," Marketing Science, INFORMS, vol. 14(3_supplem), pages G79-G88.
    10. 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.
    11. 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.
    12. 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.
    13. Solomon, Sorin & Weisbuch, Gerard & de Arcangelis, Lucilla & Jan, Naeem & Stauffer, Dietrich, 2000. "Social percolation models," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 277(1), pages 239-247.
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