A percolation-based model explaining delayed takeoff in new-product diffusion

Martin Hohnisch, Sabine Pittnauer and Dietrich Stauffer

Industrial and Corporate Change, 2008, vol. 17, issue 5, 1001-1017

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 consumers. A consumer buys the new product if her valuation of it—formed after her witnessing the product in use among her friends or neighbors—is not below the price of the product announced in a given period. Our model attributes the empirical finding of a delayed takeoff of a new product to a drift of the percolation dynamics from a nonpercolating regime to a percolating regime. This drift is caused by learning effects lowering the price of the product, or by network effects increasing its individual valuations by consumers, both with an increasing number of buyers. Copyright 2008 , Oxford University Press.

Date: 2008
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