An Agent-Based Model of Product Competition: Network Structure and Coexistence Under Different Information Regimes

The paper analyzes how the structure of interaction networks affects the diffusion patterns and market shares of different products in case of local network externalities and imperfect information. The diffusion of the different products/technologies in the market is modelled as the result of two (only partly) interrelated dynamics: i) the interaction between idiosyncratic individual thresholds and local network externalities; ii) the diffusion of the information about the product (via broadcast diffusion and word-of-mouth). The average clustering coefficient affects the overall outcome and the actual possibility that one product corners the market. Moreover, in case of small-world networks, despite the high clustering coefficient which increases the probability of an outcome with coexistence, the increase in the speed of diffusion impinges on the actual realization of such an outcome in case of sequential entry of the different technologies and/or imperfect information.

[1]  P. Geroski.  Models of technology diffusion , 2000 .

[2]  David P. Myatt,et al.  Innovation Diffusion in Heterogeneous Populations: Contagion, Social Influence, and Social Learning , 2009 .

[3]  Mark E. J. Newman,et al.  The Structure and Function of Complex Networks , 2003, SIAM Rev..

[4]  Marco Janssen,et al.  Diffusion dynamics in small-world networks with heterogeneous consumers , 2007, Comput. Math. Organ. Theory.

[5]  Lori Rosenkopf,et al.  Social Network Effects on the Extent of Innovation Diffusion: A Computer Simulation , 1997 .

[6]  Nicole Immorlica,et al.  The role of compatibility in the diffusion of technologies through social networks , 2007, EC '07.

[7]  S. Goyal,et al.  R&D Networks , 2000 .

[8]  Frank M. Bass,et al.  Comments on "A New Product Growth for Model Consumer Durables The Bass Model" , 2004, Manag. Sci..

[9]  Dunia López-Pintado,et al.  Diffusion in complex social networks , 2008, Games Econ. Behav..

[10]  S. Goyal,et al.  Non-Exclusive Conventions and Social Coordination , 1997 .

[11]  Yann Bramoullé,et al.  Risk Sharing Across Communities , 2007 .

[12]  W. Arthur,et al.  INCREASING RETURNS AND LOCK-IN BY HISTORICAL EVENTS , 1989 .

[13]  Robin Cowan,et al.  Network Structure and the Diffusion of Knowledge , 2004 .

[14]  Robin Cowan,et al.  The dynamics of collective invention , 2003 .

[15]  Jongseok Lee,et al.  Reconsideration of the Winner-Take-All Hypothesis: Complex Networks and Local Bias , 2006, Manag. Sci..

[16]  Tammo H. A. Bijmolt,et al.  Will It Spread or Not? The Effects of Social Influences and Network Topology on Innovation Diffusion , 2010 .

[17]  Koen Frenken,et al.  A percolation model of the product lifecycle , 2008 .

[18]  Susumu Shirayama,et al.  Influence of a network structure on the network effect in the communication service market , 2008 .

[19]  S. Goyal.  Connections: An Introduction to the Economics of Networks , 2009 .

[20]  Dietrich Stauffer,et al.  A percolation-based model explaining delayed takeoff in new-product diffusion , 2008 .

[21]  Jean-Michel Dalle,et al.  Heterogeneity vs. externalities in technological competition: A tale of possible technological landscapes , 1997 .

[22]  Albert-László Barabási,et al.  Statistical mechanics of complex networks , 2001, ArXiv.

[23]  Albert C. BemmaorJanghyuk Lee,et al.  Research Note The Impact of Heterogeneity and Ill-Conditioning on Diffusion Model Parameter Estimates , 2002 .

[24]  Tammo H. A. Bijmolt,et al.  Targeting and timing promotional activities : An agent-based model for the takeoff of new products , 2007 .

[25]  Frank M. Bass,et al.  A New Product Growth for Model Consumer Durables , 2004, Manag. Sci..

[26]  Robin Cowan,et al.  Technological standards with local externalities and decentralized behaviour , 1998 .

[27]  Duncan J. Watts,et al.  Collective dynamics of ‘small-world’ networks , 1998, Nature.

[28]  A. Arenas,et al.  Self-organized criticality in evolutionary systems with local interaction , 2001, cond-mat/0103496.

[29]  Rabikar Chatterjee,et al.  The Innovation Diffusion Process in a Heterogeneous Population: A Micromodeling Approach , 1990 .

[30]  L. A. Amaral,et al.  Small‐World Networks and Management Science Research: A Review , 2007 .

[31]  C. Shapiro,et al.  Systems Competition and Network Effects , 1994 .

[32]  Andrea Morrison,et al.  Gatekeepers of Knowledge within Industrial Districts: Who They Are, How They Interact , 2008 .