Forecasting adoption and subtitution of successive generations of structural wood panel products in the United States

A sizable body of literature concerned with technological substitution modeling exists within the domain of forest products. These models have generally been used to develop market share forecasts for various forest products and their substitutes based on relative product prices. Substitution models usually assume that the potential market size is known and that products can freely substitute for one another. A small but growing literature concerned with the diffusion of innovations also exists within the domain of forest products. This diffusion literature typically focuses on factors affecting consumer acceptance for product innovations and forecasting the level of demand growth without constraining the potential market size. In this paper, we examine the dynamic sales behavior of three and four successive generations of structural wood panel products using varying forms of a multigeneration diffusion model. The multigeneration diffusion model introduced here, which encompasses the elements of diffusion and substitution modeling, assumes that a new structural wood panel product will diffuse through a population of potential consumers over time and that market share competition will be introduced with successive generations of structural wood panels. It is important to note that our results are contingent upon the use of domestic production data, which is used as a proxy for domestic consumption. In other words, our results do not factor in net imports. Estimation results indicate that market share competition between various structural wood panel products are differentially impacted by substitution and diffusion effects. We explore the managerial implications of the model results and suggest alternative multigeneration diffusion models that could be developed for structural wood panel products.