A Diffusion Theory Model of Adoption and Substitution for Successive Generations of High-Technology Products

TLDR

High‑technology products exhibit dynamic sales patterns as successive generations diffuse and compete, making diffusion‑theory models relevant for understanding demand growth and technological substitution. The authors extend the Bass diffusion model to create a unified framework that simultaneously captures product diffusion and inter‑generation substitution. The model’s forecasting accuracy is validated by estimating parameters on historical data and successfully projecting future shipment volumes.

Abstract

This study deals with the dynamic sales behavior of successive generations of high-technology products. New technologies diffuse through a population of potential buyers over time. Therefore, diffusion theory models are related to this demand growth. Furthermore, successive generations of a technology compete with earlier ones, and that behavior is the subject of models of technological substitution. Building upon the Bass (Bass, F. M. 1969. A new-product growth model for consumer durables. Management Sci. 15(January) 215–227.) diffusion model, we develop a model which encompasses both diffusion and substitution. We demonstrate the forecasting properties of the model by estimating parameters over part of the data and projecting shipments for later periods.