Published research
Technological trajectories and market heterogeneity
In many empirical cases, the dynamics of diffusion suddenly bifurcate from the classical pattern universally expected and anticipated by epidemic diffusion models. When successive generations of technology overlap in a given market, a sudden convex drop in sales can occur whereby the sales suddenly plummet and the lifecycle shifts into the convex end-of-life phase instantaneously or much earlier than anticipated by diffusion models.
Abstract
In many empirical cases of technological substitution, the diffusion dynamics bifurcate and the sales of the incumbent technology suddenly shift from the smooth end-of-life pattern anticipated by classical diffusion models directly into the convex end-of-life phase. These sudden convex drops lead to significant differences in cumulative sales compared to forecasts used for selecting a firm’s technological capabilities. This paper develops an integrative model whose structure includes key interactions between performance trajectories, price dynamics, market heterogeneity, and information. Simulation results explain the underlying dynamics of convex drops, provide a boundary condition for the phenomenon, and extend the notion of demand heterogeneity.
” When a new technology n+1 takes the lead in utility-price ratio, it starts driving further growth of the addressable market. The new technology preempts the inflow of potential adopters for the incumbent technology n, resulting in a sudden drop in sales (convex behavior of a depleting stock).”
The growth of the potential market occurs as the overall market is penetrated by successive generations of technology whose utility-price ratios improve because of performance increasing and price endogenously decreasing.
The model’s structure captures the key interdependencies between performance trajectories, price dynamics, and market heterogeneity into a multi-stage adoption process where available information drives individual-level adoption.
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