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

Martin Hohnisch, Sabine Pittnauer and Dietrich Stauffer

No 9/2006, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: 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.

Keywords: new-product diffusion; innovation adoption; spatial stochastic processes; percolation (search for similar items in EconPapers)
JEL-codes: C15 L15 O33 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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