Competition and Substitution in Energy: Old Scenarios and Emerging Technologies

The diffusion of an innovation in a social system is characterised as a dynamic that typically gives rise to a nite lifecycle. The pioneering approach by Bass (1969), called the Bass model (BM), has been widely used because it considers the internal rules of the social system. The model has been extended in several directions. The generalised Bass model (GBM), by Bass et al. (1994), is the most popular extension describing the exogenous interventions acting on the timing of the diusion process. Another important extension is the Guseo and Guidolin (2009) model GGM), which defines the dynamic nature of the latent market potential. However, these univariate time series models do not consider the competitive environment, in which two or more concurrent innovations enter the market, possibly at dierent times, and target the main set of potential adopters or subgroups of potential adopters with possible interaction effects. The model proposed by Guseo and Mortarino (2014) allows a exible behaviour in describing the diffusion of two products under competition, where interaction effects, namely word-of-mouth (WOM), are split into within-product and cross-product effects. This thesis proposes an extended diffusion model for three products in a competitive framework that may be able to improve the description of mutual interactions (either competition or cooperation), along with dening specific features of each product. To examine the improvement of the proposed three-competitor model (3CM) compared with the bivariate model (2CM), both models are applied to energy data to describe competition among energy sources. The intervention functions (e.g. the external shocks) are incorporated in the models when necessary to estimate the effect of incentives and policy measures, which are crucial tools in the expansion of renewables and nonrenewable energy technologies. Without incorporating intervention functions, models based on the assumption of a constant market potential are virtually unable to capture the wide variety of shapes of products in a diusion process. Following the model proposed by Guseo and Mortarino (2015), this thesis further proposes a diusion model for three competing products that are suffciently similar to share a common market potential, where the size increases over time. Models 2CM and 3CM with dynamic market potential (DMP) are also applied to the same energy data studied in the preceding part of this work. The obtained results highlight the ecacy of the models with DMP over similar models with xed market potential. Overall, the proposed models (3CM), either with a xed market potential, m, or DMP, prove to be useful in applied contexts, for example, in describing the lifecycle of products and evaluating predictions.