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Regensburg 2016 – scientific programme

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 15: Economic models II

SOE 15.1: Talk

Wednesday, March 9, 2016, 12:15–12:30, H36

Two faces of word-of-mouth: Understanding the impact of social interactions on demand curves for innovative productsKatarzyna Maciejowska1, Arkadiusz Jedrzejewski1, Anna Kowalska-Pyzalska1, Katarzyna Sznajd-Weron2, and •Rafal Weron11Department of Operations Research, Wroclaw University of Technology, Poland — 2Department of Theoretical Physics, Wroclaw University of Technology, Poland

Word-of-mouth (WOM) is a puzzling phenomenon. It strongly influences the innovation diffusion process and is responsible for the ’S’ shape of the adoption curve. However, it is not clear how WOM affects demand curves for innovative products and strategic decisions of producers. We build an agent-based model of innovation diffusion, which links the opinions of individuals with their market behavior via the concept of reservation prices. Using Monte Carlo simulations (for artificial and real social networks from Facebook and Google+) and mean-field semi-analytical treatment (for artificial networks) we demonstrate that WOM may have ambiguous consequences and should be taken into account when designing marketing strategies. Conditional on the targeted penetration level and the market price, the company should aim either at weakening or strengthening the WOM effect. By doing so, it can increase the demand and increase potential revenues.

(Submitted to: Int. J. Research in Marketing)

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