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

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.