Based on a table, the service price of $12 per month and $225 unit price suggest

Question

Based on a table, the service price of $12 per month and $225 unit price suggests that the estimated market share for radios is 29.05 million. You do not need this table; it is prices by unit and per hour that tell you what the estimated market share is, which I have done here.

1. Using this and a rate of innovator adoption (p) of 0.016 and a rate of imitator adoption (q) of 0.410, compute the demand forecast for radio for the next 20 years. In what year will the demand be greater than three million for the first time?

Note that this is likely asking for us to solve the Bass Diffusion Model.

2. What happens to the demand if the service price goes to $6 per month and a unit price of $150, which suggests 47.43 million as the new market share estimate based on the same table?

Explanation / Answer

1. Computation of demand forecast for radio for next 20 years:

As we know, the estimated market share for radios is 29.50 million and the rate of innovator adoption (p) and rate of imitator adoption (q) is 0.016 and 0.410 respectively,

Bass diffusion Model Formula:

N(t) = N(t-1) + p {m - N(t-1) } + q [N(t-1) / m * {m - N (t-1) } ]

Where, n = No fo adoptions as of period t

p = innovation rate

m = total market to be penetrated

n = imitation rate

Applying the values of p = 0.016, q = 0.410 and m = 29.50 million in the above formula for 20 years, we get the following figures:

The demand be greater than three million for the first time in 1998, amounting to 3.2 million rupees.

Year Sales 1990 472,000 1991 654,872 1992 898,339 1993 1212929 1994 1602096 1995 2053445 1996 2527623 1997 2950367 1998 3219188 1999 3236470 2000 2963459 2001 2458121 2002 1853754 2003 1286860 2004 837166 2005 519905 2006 313070 2007 184897 2008 107919 2009 62550

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