Saddle points in innovation diffusion curves: an explanation from bounded rationality Lorena Cadavid 1 and Carlos Jaime Franco Cardona 1 1 Universidad Nacional de Colombia – sede Medellín, Medellín, Colombia {dlcadavi, cjfranco}@unal.edu.co ABSTRACT. Empirical evidence shows that mostly complete and successful processes of innovation diffusion are S-shaped. However, some diffusion pro- cesses exhibit a non-perfect S-curve, but show a saddle point, which is dis- played as a double-S. The reasons behind this phenomenon have been little studied in the literature. This paper addresses the emergence of the double-S phenomenon in the innovation diffusion process and provides an explanation for it. In order to do that, the authors develop an agent-based simulation model to representing the diffusion of two innovations in a competitive market consid- ering elements of bounded rationality. The results show saddle points appear as a result of three characteristics: (1) the heterogeneity in the population, (2) the presence of asymmetric information and (3) the satisfaction criterion for selec- tion. Keywords: Innovation Diffusion, Agent-based Modeling, Bounded Rationality 1 Introduction The spread of an innovation over markets is known as innovation diffusion, a process by which an innovation is communicated through certain channels over time among members of a social system [1]. Empirical studies show that successful and complete processes of innovation diffusion take S shape [2], as many natural phenomena; hence, theoretical studies attempt to find the rate and amount of adopters in a specific population during a period of time [3]. Nevertheless, some diffusion processes exhibit a non-perfect S-curve, but show a saddle point, which is displayed as a double-S. Figure 1 shows the diffusion curves for telephone, automobile, air conditioning and clothes washer in U.S.A, as some of the examples of this phenomenon. Evidence form Europe is collected by Goldenberg, Libai, and Muller [4], as well as recent S-shape diffusion data are presented by Tellis and Chandrasekaran [5].