Virtual Bass Model and the Left-Hand Data-Truncation Bias in Diffusion of Innovation Studies

One of the most important applications of the Bass model is “guessing by analogy ”— the parameter estimates of the Bass model for analogous products can be used to predict the diffusion pattern of a new product. However, estimates based on left-hand truncated data will be biased unless care is taken to adjust for the bias. We demonstrate the prevalence of left truncation in historical sales data and present a method for dealing with the bias by the Virtual Bass Model. We use the model to develop a database of parameter estimates that may be used in “guessing by analogy.” © 2006 Elsevier B.V. All rights reserved.

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