Market Penetration of Competing New Technology: A Maximum Likelihood (MLE) Approach to Modeling the Emergence of the Electronic Ballasts
- BATTELLE (PACIFIC NW LAB)
Technology is the major driving force of productivity gains and economic growth. Historical studies throughout the last decade attributed about half of economic growth to technological change and the other half to the combined effect of all other driving forces, such as the larger and better-qualified labor force and accumulated stock of capital. V. Peterka (1977) was one of the first to break new ground exploring the mathematical methods for forecasting market shares of competing technologies. Having information about the historical market shares of competing technologies, Peterka described a unique set of algebraic derivations in the MLEST Model. Since Peterka, a large number of studies described the theoretical basis for technology diffusion, however very few provided a real world examples or verified the applicability to the market diffusion theory for energy applications. Objective: The objective of this study is to provide an example of projecting market shares of competing technologies using maximum likelihood estimation (MLE). The application applies to the emergence of the electronic ballast for fluorescent lighting applications. In this example we model the historical competition between the existing technology (magnetic ballasts) and the emerging technology (electronic ballasts). The factors surrounding electronic ballasts as replacement for the magnetic ballasts provide a rich example of competing technologies. The lessons from this example could be used to inform forecasting of many other similar technologies penetrating the market in the U.S. energy sector (e.g. fuel cells, digital information and communication technologies ICTs ...etc). The example will forecast the market shares of magnetic and electronic ballast technologies to 2020 and discuss the energy savings and other benefits. This type of modeling and analysis can help inform the rule-making process for any potential future DOE standards for electronic ballasts. Method: Kennedy, Peter (1993) listed several desired properties for using MLE when compared to other statistical techniques such as the Ordinary Least Square (OLS) in forecasting including that MLE estimates are unbiased, consistent, and asymptotically efficient. The model introduces a new technology at certain point of time using some initially small (<1%) market share and expands the parameters of all competing technologies to estimate the future expected market shares of both new and old technologies. The theoretical basis of this capability will be presented to make the model applicable for other examples that include new or emerging technologies. The MLEST model will be used to estimate the optimum value of the specific investment costs, specific production costs, and the market growth rates. These parameter estimates are essential forecasting future market shares. The specific investment is the capital cost needed to increase the production by one unit, while the specific production cost of technology is the operation and maintenance cost needed to increase the production by one unit. The market growth rate is the rate by which total production of all competing technologies grow over time. In brief, the model estimates the best fit parameters of the growth functions of each competing technology and uses these parameters to forecast their estimated growth in the future. Data Source and Modeling: The Current Industrial Report (CIR) produced annually from the U.S. Census Bureau published the market shares for magnetic ballasts and electronic ballasts for the period 1986-2000. Other sources will be used including the DOE and its affiliated labs as well as journal articles and publications to explore the U.S. lighting fixtures market and its economic characteristics. Highlights of the results will be forthcoming.
- Research Organization:
- Pacific Northwest National Lab., Richland, WA (US)
- Sponsoring Organization:
- US Department of Energy (US)
- DOE Contract Number:
- AC06-76RL01830
- OSTI ID:
- 15004677
- Report Number(s):
- PNWD-SA-5914; TRN: US200320%%306
- Resource Relation:
- Conference: 2003 International Energy Program Evaluation Conference Proceedings. Evaluation: Meeting Diverse Needs, Seattle, WA (US), 08/20/2003--08/22/2003; Other Information: PBD: 20 Aug 2003
- Country of Publication:
- United States
- Language:
- English
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