Empirical studies of new product diffusion under uncertainty

The operational dynamics arising out of the diffusion of solar lamps (a new product) in rural India has been discussed in this paper. Empirical evidence is provided to show that the shortage of product supply adversely affects the diffusion process. The shortage not only delays the diffusion process, but also creates multiple phases of diffusion wherein each phase exhibits distinct new product diffusion behavior. That is, the effect of past sales and whatever positive word-of-mouth effect that might generate is lost when periods of inactivity due to inventory shortage occurs. So aggregate, independent and dependent Bass diffusion models were fitted to the collected empirical data. Results from computational experiments based on Bass model calibration confirm that new product diffusion takes place in distinct and independent phases due to inventory stock outs (supply shortage).