Applications of a multi-generation diffusion model to pagers and mobile phones

Abstract

Norton and Bass proposed the diffusion model of adoption and substitution for multi-generation products in 1987. All multi-generational models based on this model have at least three parameter families. One family is referred to as the "coefficient of innovation". Another family is referred to as the "coefficient of imitation". Norton and Bass (1987) argue that the coefficients should be constant across generations. These assumptions are tested and discussed by Islam and Meade (1997) by using data of mobile telephone technology from eleven countries. They demonstrate that, in most cases, the hypothesis of constant coefficients can be rejected. We attempt to investigate the adoption and substitution of pagers and mobile phones in Taiwan by applying the multi-generation model developed by Norton and Bass (1987). In addition, the result that the coefficients aren't constant in Islam and Meade are adopted in their model. Results in their research show that the multi-generation diffusion model can be successfully applied to the substitution and adoption of pagers and mobile phones. Moreover, the use of a model with unequal coefficients is shown to considerably improve forecasting performance.