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Instability And Network Effects In Innovative Markets

Author

Listed:
  • Paolo Sgrignoli

    (Department of Economics (University of Verona))

  • Elena Agliari

    (University of Parma)

  • Raffaella Burioni

    (University of Parma)

  • Augusto Schianchi

    (University of Parma)

Abstract

We consider a network of interacting agents and we model the process of choice on the adoption of a given innovative product by means of statistical mechanics tools. The modelization allows us to focus on the effects of direct interactions among agents in establishing the success or failure of the product itself. Mimicking real systems, the whole population is divided into two sub-communities called, respectively, Innovators and Followers, where the former are assumed to display more influence power. We study in detail and via numerical simulations on a random graph two different scenarios: no-feedback interaction, where innovators are cohesive and not sensitively affected by the remaining population, and feedback interaction, where the influence of followers on innovators is non negligible. The outcomes are markedly different: in the former case, which corresponds to the creation of a niche in the market, Innovators are able to drive and polarize the whole market. In the latter case the behavior of the market cannot be definitely predicted and become unstable. In both cases we highlight the emergence of collective phenomena and we show how the final outcome, in terms of the number of buyers, is affected by the concentration of innovators and by the interaction strengths among agents.

Suggested Citation

  • Paolo Sgrignoli & Elena Agliari & Raffaella Burioni & Augusto Schianchi, 2014. "Instability And Network Effects In Innovative Markets," Working Papers 16/2014, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:16/2014
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    References listed on IDEAS

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    More about this item

    Keywords

    Innovation diffusion; Agent-based; Collective phenomena; Innovators; Random network;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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