Competitive Products’ Diffusion Behavior considering Cost Learning Effect Based on System Dynamics

Bass Model, the most representative accomplishment in the field of product diffusion, is built on a series of assumptions which seriously limit the applied range of the model. This paper improves Bass Model so that it could be applied to competitive products. Also, this paper presents an expression of the analytical form of product margins. By taking the unit variable cost’s learning effect into consideration, its impacts on product gains was analyzed and proved theoretically. The traditional mathematical model being utilized to describe the product diffusion procedure was converted into system dynamics model. The validity of the model was proved qualitatively through the simulation by harnessing Vensim software. Besides, sensitivity analysis of variants was conducted to explore the typical parameters and to see in which way they would have influence on the model. Variable analysis and the results of model simulation further reflect the interactions and system structural characteristics of various factors which have a bearing on the product diffusion. The structural properties are thoroughly studied, thus provide a solid base for setting the strategies concerning product development and diffusion process.