Convex drops in technological substitutions

In many empirical cases of technological substitution, the diffusion dynamics bifurcate and the sales of the incumbent technology suddenly shift from the smooth end-of-life pattern anticipated by classical diffusion models directly into the convex end-of-life phase. These sudden convex drops lead to significant differences in cumulative sales compared to forecasts used for selecting a firm’s technological capabilities. This paper develops an integrative model whose structure includes key interactions between performance trajectories, price dynamics, market heterogeneity, and information. Simulation results explain the underlying dynamics of convex drops, provide a boundary condition for the phenomenon, and extend the notion of demand heterogeneity.