Premium
Marketing Innovation
Author(s) -
Chen Yongmin
Publication year - 2006
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2006.00093.x
Subject(s) - incentive , business , marketing , competition (biology) , value (mathematics) , duopoly , transaction cost , product innovation , product (mathematics) , industrial organization , marketing strategy , economics , microeconomics , cournot competition , ecology , geometry , mathematics , finance , machine learning , computer science , biology
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.