Boundary Effects in the Diffusion of New Products on Cartesian Networks

We analyze the effect of boundaries in the discrete Bass model on D-dimensional Cartesian networks. In two dimensions, this model describes the diffusion of new products that spread primarily by spatial peer effects, such as residential photovoltaic solar systems. We show analytically that nodes (residential units) that are located near the boundary are less likely to adopt than centrally located ones. This boundary effect is local and decays exponentially with the distance from the boundary. At the aggregate level, boundary effects reduce the overall adoption level. The magnitude of this reduction scales as $\frac{1}{M^{1/D}}$, where M is the number of nodes. Our analysis is supported by empirical evidence on the effect of boundaries on the adoption of solar.

Funding: This material is based upon work supported by the Department of Energy (DOE) [Grant DE-EE0007657].

Supplemental Material: The online appendix is available at https://doi.org/10.1287/opre.2022.0004.