A Two-Stage Model for Diffusion of Innovations

Abstract

The objective of this paper is to provide an analytical framework to study the whole process of diffusion of innovations, new products or ideas: we take into account knowledge transfer in a complex society, decisional process for adoption and key features in the spread of new technologies. For this purpose, we propose a probabilistic model based on an interacting population connected through new communication channels (such as social media) where potential adopters are linked with each other at different connection degrees. Our diffusion curve is the result of an emotion driven decision process following the awareness phase. Finally, we are able to recover stylized facts highlighted by the extant literature in the field.

Keywords: Awareness and adoption, diffusion of innovations, emotion driven decision making, hubs, random utility model, social media marketing

JEL Classification: C63, M31, D83