An Empirical Inquiry into New Subscriber Services under Interdependent Adoption Processes

Abstract

This article estimates dynamic diffusion systems developed earlier by Mesak and Darrat (2002) for newsubscriber consumer services. Each system consists of two equations, one for the retailer adoption process and another for the consumer adoption process. Using diffusion annual data related to the cable TV industry in the United States, three alternative interactive systems based on the Bass (1969) model are estimated and contrasted in terms of their predictive power. The empirical results support a two-way diffusion system that includes price. The incorporation of price proves critical for the system’s predictive power. In addition, a noninteractive, two-simultaneous-equations model as well as a single-equation model fail to provide adequate representation of the data.