The dynamic multi-innovation diffusion model with active potential consumers and its application to the diffusion of local telephony and mobile telephony in China

Abstract

New product innovations are emerging in large numbers day by day, and constantly struggling for market acceptance. Various models have been constructed to explore the principles of innovation diffusion and market share. The relationships between those innovations also draw the attention of scholars, and many competition models have been established to show today’s competitive social environment in which increased adoptions of one innovation result in decreased adoptions of other innovations. But that is only one of the probable relationships between innovations. Moreover, the active colony of consumers is vitally important for innovation diffusion since the updating rate of products is too frequent in the information age nowadays. In order to find the principles of the relationships between innovations and the importance of the affection on the active colony of an innovation, in this research we concentrate on developing and analyzing a dynamic rate model for multi-innovations with active colony. The innovation interrelationships may include independence, complementation, substitution, competition and contingency, etc. Furthermore, an empirical analysis of the diffusion of mobile telephony and local telephony in China has been made. For the diffusion of those communication innovations, the affection of active colony should not be ignored. The parameters of the model have been estimated on the basis of the historical data and numerical simulation has been carried out to show the relationship between the diffusion process of mobile telephony and local telephony in China. The result shows that the model matches the history data perfectly and better than many empirical estimations in the past: the increased adoptions of local telephony result in decreased adoptions of mobile telephony, while the increased adoptions of mobile telephony result in increased adoptions of local telephony.

Keywords:

• differential equations
• diffusion model
• active colony
• innovation diffusion
• mobile telephony
• local telephony