Diffusion of information product with network effect

In the replacing market, diffusion of information product is influenced by users´ interaction and cooperating function between the complementary software and hardware. Therefore, this paper creates the direct network effect function which is based on the interpersonal relationship, and the indirect network effect function which is composed by the utility of the software and hardware. Based on the scale-free social network and the economic analysis of network effect, as well as the decision-making transfer function, this paper simulates the microcosmic diffusion process upon the user´s utility. The simulation result demonstrates: Due to the network effect, it will appear the phenomenon that old and new product will coexist in the replacing market. The number of initial subscribers and the interaction plays important part in the takeoff time and amount of diffusion. After the takeoff threshold, the indirect network effect determines the market share of the new product.