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Marketing Innovation

23 Pages Posted: 13 Apr 2006  

Yongmin Chen

University of Colorado at Boulder - Department of Economics

Abstract

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.

Suggested Citation

Chen, Yongmin, Marketing Innovation. Journal of Economics & Management Strategy, Vol. 15, No.1, pp. 101-123, March 2006. Available at SSRN: https://ssrn.com/abstract=874121 or http://dx.doi.org/10.1111/j.1530-9134.2006.00093.x

Yongmin Chen (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States
303-492-8736 (Phone)
303-492-8960 (Fax)

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