University of Colorado at Boulder - Department of Economics
Journal of Economics & Management Strategy, Vol. 15, No.1, pp. 101-123, March 2006
This paper provides an economic analysis of marketing innovation. A dynamic duopoly model is developed to study two forms of marketing innovation: γ, which allows a firm to acquire consumer information effectively; and σ, which reduces consumer transaction costs. The incentives and effects of marketing innovation differ markedly from those of product or process innovations. Although γ benefits the innovating firm, it hurts some consumers; and, while σ benefits all consumers, it may or may not benefit the innovating firm. Increased competition intensity reduces the value of γ but increases the value of σ. The private incentive is too high for γ but too low for σ.
Number of Pages in PDF File: 23
Date posted: April 13, 2006
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