A Consumer-Based Model of Diffusion
of Two Competitive, Compatible, and Durable Goods
Masaki Tomochi, Mitsuo Kono
mtomochi@uci.edu, kono@fps.chuo-u.ac.jp
The diffusion of two competitive, interchangeable, and
durable goods is studied under the framework of a spatial game where consumers
are distributed on two-dimensional square lattice and play 3 by 3 symmetric
coordination-like games with their nearest neighbors. There are three
strategies, either consuming a product A or B, or a strategy C of not consuming
either A or B. The payoff matrix of the game contains the effects of
network externality, that is, the payoffs are dependent on the number of
agents adopting the strategies A, B, or C. Both simulations and mean-field
approximation show that the existence of the effects of the network externality
amplifies any slight initial difference in the number of agents who adopt
either A or B and eventually promotes the superior product to take over the
entire market. On the other hand, without effects of the network externality
the slight initial difference is not enlarged and both superior and inferior
products are observed to coexist by forming clusters in the market.
Moreover, the effects of innovation factors that help an inferior product
to retake over the market are studied. It is shown that both the timing and
size of the innovation factor matter for an inferior product in order to
retake the market.