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

Martin Hohnisch, Sabine Pittnauer and Dietrich Stauffer ()

Bonn Econ Discussion Papers from University of Bonn, Germany

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 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-ino and nep-tid
Date: 2006-04
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