Track: Operations Research
Abstract
In this paper, we incorporate the idea of uncertainty in adoption process in innovation diffusion model in dynamic market. The diffusion process is sum of a deterministic component that is a function of cumulative adopters and a random fluctuation with intensity proportional to the cumulative adopters. The state of the system is modeled as a stochastic process which is governed by stochastic differential equation. Its applicability and accuracy of model is illustrated by means of new product sales data. Predictive validity and mean square error have been used to check the validity of the proposed model.