IDEAS home Printed from https://ideas.repec.org/p/wuu/wpaper/hsc1604.html
   My bibliography  Save this paper

Impact of social interactions on demand curves for innovative products

Author

Listed:
  • Katarzyna Maciejowska
  • Arkadiusz Jedrzejewski
  • Anna Kowalska-Pyzalska
  • Rafal Weron

Abstract

Empirical studies suggest that word-of-mouth (WOM) strongly influences the innovation diffusion process and is responsible for the 'S' shape of the adoption curve. However, it is not clear how WOM affects demand curves for innovative products and strategic decisions of producers. Using an agent-based model of innovation diffusion, which links consumer opinions with reservation prices, we show that a relatively strong WOM effect can lead to the creation of two separated price-quantity regimes, with a nonlinear transition between them. A small shift of the product's market price can result in a drastic change of the demanded quantity and, hence, the revenues of a firm. Using Monte Carlo simulations and mean-field treatment we demonstrate that WOM may have ambiguous consequences and should be taken into account when designing marketing strategies.

Suggested Citation

  • Katarzyna Maciejowska & Arkadiusz Jedrzejewski & Anna Kowalska-Pyzalska & Rafal Weron, 2016. "Impact of social interactions on demand curves for innovative products," HSC Research Reports HSC/16/04, Hugo Steinhaus Center, Wroclaw University of Technology.
  • Handle: RePEc:wuu:wpaper:hsc1604
    as

    Download full text from publisher

    File URL: http://www.im.pwr.wroc.pl/~hugo/RePEc/wuu/wpaper/HSC_16_04.pdf
    File Function: Original version, 2016
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul R. Nail & Katarzyna Sznajd-Weron, 2016. "The diamond model of social response within an agent-based approach," HSC Research Reports HSC/16/02, Hugo Steinhaus Center, Wroclaw University of Technology.

    More about this item

    Keywords

    Word-of-mouth; Innovation diffusion; Agent-based model; Demand curve; Marketing strategy;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wuu:wpaper:hsc1604. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rafal Weron). General contact details of provider: http://edirc.repec.org/data/hspwrpl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.