Adoption epidemics and viral marketing

David McAdams () and Yangbo Song ()
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David McAdams: Fuqua School of Business and Economics Department, Duke University
Yangbo Song: School of Management and Economics, The Chinese University of Hong Kong (Shenzhen)

Theoretical Economics, Forthcoming

Abstract: An innovation (e.g., new product or idea) spreads like a virus, transmitted by those who have previously adopted it. Agents update their beliefs about innovation quality based on private signals and when they hear about the innovation. We characterize equilibrium adoption dynamics and the resulting lifecycle of virally-spread innovations. Herding on adoption can occur but only early in the innovation lifecycle, and adoption eventually ceases for all virally-spread innovations. A producer capable of advertising directly to consumers finds it optimal to wait and allow awareness to grow virally initially after launch.

Keywords: SIR model; economic epidemic; innovation lifecycle (search for similar items in EconPapers)
JEL-codes: C72 D62 D83 (search for similar items in EconPapers)
Date: 2024-09-09
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