A choice-based diffusion model for multiple generations of products

We incorporate diffusion effects and choice effects in an integrated model to capture simultaneously the diffusion and substitution processes for each successive generation of a durable technology. The choice literature gener ally ignores demand dynamics and previous multigeneration diffusion models rarely include control variables. The proposed model is a combination of th e two approaches. The basic premise of the proposed model states that the r eplacement of an older product by a newer one is based on the choice behavi or of consumers, where consumers choose a product to maximize their utility . Then we can derive the implied relationships among choice probabilities, diffusion processes, and marketing mix variables. To verify the proposed mo del, we also analyze the IBM mainframe market and worldwide DRAM (dynamic r andom access memory) market. (C) 1999 Elsevier Science Inc.