A Population-Growth Model for Multiple Generations of Technology Products

Hongmin Li (), Dieter Armbruster () and Karl G. Kempf ()
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Hongmin Li: W. P. Carey School of Business, Arizona State University, Tempe, Arizona 85287
Dieter Armbruster: School of Mathematical and Statistical Sciences, Arizona State University, Tempe, Arizona 85287
Karl G. Kempf: Decision Engineering Group, Intel Corporation, Chandler, Arizona 85226

Manufacturing & Service Operations Management, 2013, vol. 15, issue 3, 343-360

Abstract: In this paper, we consider the demand for multiple, successive generations of products and develop a population-growth model that allows demand transitions across multiple product generations and takes into consideration the effect of competition. We propose an iterative-descent method for obtaining the parameter estimates and the covariance matrix, and we show that the method is theoretically sound and overcomes the difficulty that the units-in-use population of each product is not observable. We test the model on both simulated sales data and Intel's high-end desktop processor sales data. We use two alternative specifications for product strength in this market: performance and performance/price ratio. The former demonstrates better fit and forecast accuracy, likely due to the low price sensitivity of this high-end market. In addition, the parameter estimate suggests that, for the innovators in the diffusion of product adoption, brand switchings are more strongly influenced by product strength than within-brand product upgrades in this market. Our results indicate that compared with the Bass model, Norton–Bass model, and Jun–Park choice-based diffusion model, our approach is a better fit for strategic forecasting that occurs many months or years before the actual product launch.

Keywords: product transitions; forecasting; multiple-generation demand model; diffusion (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:15:y:2013:i:3:p:343-360

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