Impact of Social Interactions on Demand Curves for Innovative Products

• Authors: K. Maciejowska , A. Jędrzejewski , A. Kowalska-Pyzalska , R. Weron
• Languages of publication: EN

Abstracts

EN

Empirical studies suggest that word-of-mouth strongly influences the innovation diffusion process and is responsible for the "S" shape of the adoption curve. However, it is not clear how word-of-mouth affects demand curves for innovative products and strategic decisions of producers. Using an agent-based model of innovation diffusion, which links consumer opinions with reservation prices, we show that a relatively strong word-of-mouth effect can lead to the creation of two separated price-quantity regimes, with a nonlinear transition between them. A small shift of the product's market price can result in a drastic change of the demanded quantity and, hence, the revenues of a firm. Using Monte Carlo simulations and mean-field treatment we demonstrate that word-of-mouth may have ambiguous consequences and should be taken into account when designing marketing strategies.

Keywords

EN

89.65.Gh; 87.23.Ge

Discipline

• 87.23.Ge: Dynamics of social systems
• 89.65.Gh: Economics; econophysics, financial markets, business and management(for economic issues regarding production and use of renewable energy, see 88.05.Lg)

• Publisher: Institute of Physics, Polish Academy of Sciences
• Journal: Acta Physica Polonica A
• Year: 2016
• Volume: 129
• Issue: 5
• Pages: 1045-1049

Dates

published

2016-05

Contributors

author

K. Maciejowska

• Department of Operations Research, Wrocław University of Technology, Wrocław, Poland

author

A. Jędrzejewski

• Department of Operations Research, Wrocław University of Technology, Wrocław, Poland

author

A. Kowalska-Pyzalska

• Department of Operations Research, Wrocław University of Technology, Wrocław, Poland

author

R. Weron

• Department of Operations Research, Wrocław University of Technology, Wrocław, Poland

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Identifiers

DOI

10.12693/APhysPolA.129.1045