An Agent-Based Model of Product Competition: Network Structure and Coexistence Under Different Information Regimes

Abstract

The paper analyzes how the structure of social networks affects product diffusion and competition under different information regimes. Diffusion is modeled as the result of idiosyncratic adoption thresholds, local network effects, and information diffusion broadcasting and word-of mouth by previous adopters). A high social cohesion tends to decrease the probability of one product cornering the market. However, in small-world networks, the higher speed of diffusion produced by the low average distance increases such probability.

Keywords: Agent-based model, innovation diffusion, network effects, social networks, small-world

JEL Classification: D83, D85, M31, O33