Diffusion of New Products in Heterogeneous Populations: Incorporating Stochastic Coefficients

Diffusion models have had a major impact on the literature and practice of marketing science. Following the pioneering work of Bass (1969), which suggested a deterministic model for homogeneous populations, the basic diffusion model has been extended to incorporate: changes in the market potential over time (Mahajan & Peterson 1978); complimentarity, substitutability, contigent & independent relations of the new product with other brands in the market place (Peterson & Mahajan 1978); spatial diffusion pattern (Mahajan & Peterson 1979); varying word-of-mouth effects (Easingwood, Mahajan & Muller 1983); various marketing mix effects including the effect of price on both innovation and imitation coefficients (Robinson and Lakhani 1975) or advertising effect on the innovation coefficient (Horsky and Simon 1983). competitive effects (Eliashberg & Jeuland 1982, Fershtman, Mahajan and Muller 1983