Imitation and the diffusion of innovation in e-commerce

This paper presents a model of adoption and diffusion of innovations that concern the technology of e-commerce. First, a model of optimal adoption of e-commerce innovation is presented. In this model web companies are assumed to behave in an imitative way: facing an innovation of uncertain profitability, they perceive the adoption decisions of other e-traders as favourable signals. This behaviour generates a network of cross-monitoring companies that is here modeled as a directional graph. Finally, the paper presents an algorithm that describes and computes the propagation of innovation in such a graph.