Investigating Consumer Adoption of Related Technology Products

58 Pages Posted: 4 Dec 2007 Last revised: 25 Feb 2009

S. Sriram

The Stephen M. Ross School of Business at the University of Michigan

Pradeep K. Chintagunta

University of Chicago

Manoj K. Agarwal

School of Management, Binghamton University, SUNY

Date Written: December 3, 2007

Abstract

We present a framework for modeling consumer adoption of multiple categories of technology products that may be related as complements (or substitutes). The context of technology products as well as the relationship between categories poses some unique challenges. First, the declining prices (and the corresponding increase in quality levels) over time imply that consumers anticipate these changes and make a trade-off between adopting the product early on and consuming the product for a longer time versus adopting later at lower prices. Second, the durable nature of technology products implies that even if two categories are related as complements, consumers may stagger their purchases over several periods; unlike in the case of packaged goods, one cannot infer complementary relationships between these categories based on joint purchases. Third, the adoption decision for some categories (such as printers) may be contingent upon adoption of another related category (such as a personal computer). We illustrate how our proposed modeling framework is flexible enough to address these issues in the context of two related categories and discuss how it can be extended to multiple categories. We apply our modeling framework to a unique dataset that contains information on consumer adoption of three related categories of technology products - personal computers, digital cameras, and printers. The results reveal a strong complementary relationship between these categories. As a result, the probability that a consumer would adopt a given category increases significantly if she has already adopted one or more of the related categories. Policy simulations based on a temporary price decrease in any one category provide interesting insights into how consumers would modify their adoption behavior over time as well as across categories as a consequence of the price decrease.

Keywords: Technology products, product adoption, multiple categories, complementarity, forward-looking consumers

JEL Classification: C13, D91, M30, O39

Suggested Citation

Sriram, S. and Chintagunta, Pradeep K. and Agarwal, Manoj K., Investigating Consumer Adoption of Related Technology Products (December 3, 2007). Chicago Booth School of Business Research Paper No. 08-29. Available at SSRN: https://ssrn.com/abstract=1050901 or http://dx.doi.org/10.2139/ssrn.1050901

S. Sriram (Contact Author)

The Stephen M. Ross School of Business at the University of Michigan ( email )

Ann Arbor, MI 48109
United States

Pradeep K. Chintagunta

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)

Manoj K. Agarwal

School of Management, Binghamton University, SUNY ( email )

Binghamton, NY 13902-6015
United States
607-777-6860 (Phone)

HOME PAGE: http://som.binghamton.edu/faculty/agarwal.htm

Paper statistics

Downloads
217
Rank
114,441
Abstract Views
1,349