Market Penetration of Competing New Technology: A Maximum Likelihood (MLE) Approach to Modeling the Emergence of the Electronic Ballasts

To study the market penetration of electronic ballasts, the authors started with a conventional Ordinary Least Squares (OLS) approach, tested different functional forms, and corrected for possible failures of the selected model. This study used the Autoregressive Conditional Heteroscedasticity (ARCH) and maximum likelihood estimation (MLE) modeling approach to generate a prediction scheme for electronic ballasts. ARCH has advantages over OLS models for explaining market penetration independent variables over time. Testing for autocorrelation and heteroscedasticity failures is crucial to modeling policy implications and studying impacts of regulatory mandates. The MLE approach has been used to model multiple-product competition for market share between products having extremely long lifetimes and market duration, such as coal or oil. The MLE approach is validated for products such as traditional durable goods of relevance to energy efficiency – in this case of electronic ballasts.