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Adoption epidemics and viral marketing

Author

Listed:
  • McAdams, David

    (Fuqua School of Business and Economics Department, Duke University)

  • Song, Yangbo

    (School of Management and Economics, The Chinese University of Hong Kong (Shenzhen))

Abstract

An innovation (e.g., new product or idea) spreads like a virus, transmitted by those who have previously adopted it. Agents update their beliefs about innovation quality based on private signals and when they hear about the innovation. We characterize equilibrium adoption dynamics and the resulting lifecycle of virally-spread innovations. Herding on adoption can occur but only early in the innovation lifecycle, and adoption eventually ceases for all virally-spread innovations. A producer capable of advertising directly to consumers finds it optimal to wait and allow awareness to grow virally initially after launch.

Suggested Citation

  • McAdams, David & Song, Yangbo, 0. "Adoption epidemics and viral marketing," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:5886
    as

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    More about this item

    Keywords

    SIR model; economic epidemic; innovation lifecycle;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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