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Inter-channel competition and new product diffusion: market making, market taking, and competitive effects in several European countries

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The literature on the diffusion of new consumer durables tends to overlook the influence of the retailer. A new consumer durable cannot diffuse if prospective adopters cannot find a store/channel in which to purchase it. Yet, most diffusion models appear to assume that retail availability simply happens, and does so in a manner that has little impact on the pattern of diffusion. The authors propose several roles that different types of retailers may play, and focus on the effects of inter-type rivalry among retailers on the diffusion of the innovation among consumers and the coverage of the innovation offered by retailers. They propose a model that allows for a simultaneous relationship between a retailer's decision to carry an innovation (coverage) and a consumer's decision to adopt the innovation (diffusion). They estimate this model for a relatively recent innovation, the 32-bit video game console category, with data from five different retail environments in Europe. The authors find evidence that different types of retailers vary in their influence upon consumers. They also find evidence that unfolding diffusion dynamics can influence the pattern of retail coverage. Notably, the results show that different retail environments give rise to different diffusion patterns, suggesting that a standardized distribution policy over countries is inappropriate.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp2001/2001-57.pdf

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Copyright INSEAD. All rights reserved