Social structure and consumption: on the diffusion of consumer good innovation

This paper presents a simple evolutionary model to study the diffusion patterns of product innovations for consumer goods. Following a Veblenian theme, we interpret consumption as a social activity constrained by social norms and class structure. Societies that allow for more behavioral variety will experience faster adoption of new consumer goods. We also find that the speed of diffusion as well as the saturation levels reached depend greatly on the structure of a society. Combining these two effects, we conclude that a social structure displaying behavioral variety and an even class structure fares better than any other social set-up in terms of the speed of adoption of product innovations and product variety. JEL Classification: D11, O31 This paper has benefited from comments by Robin Cowan and seminar participants at the University of Economics in Vienna, the Maastricht Economic Research Institute on Innovation and Technology (MERIT), University of Maastricht, participants of the EMAEE 2003 Conference in Augsburg, Germany as well as the Schumpeter Conference 2004 in Milan, Italy. We also would like to thank two anonymous referees for their constructive criticism and suggestions. The usual disclaimers apply. Correspondence to: A. Reinstaller