Modeling Seasonality in New Product Diffusion

44 Pages Posted: 19 Aug 2010

See all articles by Yuri Peers

Yuri Peers

Erasmus Research Institute of Management (ERIM) - Joint Research Institute of Rotterdam School of Management (RSM) and Erasmus School of Economics (ESE), EUR ; Econometric Institute - Erasmus University Rotterdam

D. Fok

Econometric Institute - Erasmus University Rotterdam; Erasmus Research Institute of Management (ERIM); Tinbergen Institute Rotterdam

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics

Date Written: 15 2010 7,

Abstract

Although high frequency diffusion data is nowadays available, common practice is still to only use yearly figures in order to get rid of seasonality. This paper proposes a diffusion model that captures seasonality in a way that naturally matches the overall S-shaped pattern. The model is based on the assumption that additional sales at seasonal peaks are drawn from previous or future periods. This implies that the seasonal pattern does not influence the underlying diffusion pattern. The model is compared with alternative approaches through simulations and empirical examples. As alternatives we consider the standard Generalized Bass Model and ignoring seasonality by using the basic Bass model. One of our main findings is that modeling seasonality in a Generalized Bass Model does generate good predictions, but gives biased estimates. In particular, the market potential parameter will be underestimated. Ignoring seasonality gives the true parameter estimates if the data is available of the entire diffusion period. However, when only part of the diffusion period is available estimates and predictions become biased. Our model gives correct estimates and predictions even if the full diffusion process is not yet available.

Keywords: new product diffusion, seasonality

JEL Classification: C44, M31, M

Suggested Citation

Peers, Yuri and Fok, Dennis and Franses, Philip Hans, Modeling Seasonality in New Product Diffusion (15 2010 7,). ERIM Report Series Reference No. ERS-2010-029-MKT. Available at SSRN: https://ssrn.com/abstract=1660905

Yuri Peers (Contact Author)

Erasmus Research Institute of Management (ERIM) - Joint Research Institute of Rotterdam School of Management (RSM) and Erasmus School of Economics (ESE), EUR ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+3110-4088951 (Phone)

Econometric Institute - Erasmus University Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+3110-4088951 (Phone)

Dennis Fok

Econometric Institute - Erasmus University Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1333 (Phone)
+31 10 408 9162 (Fax)

Tinbergen Institute Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1278 (Phone)
+31 10 408 9162 (Fax)

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