Marketing Innovation

Yongmin Chen

Journal of Economics & Management Strategy, 2006, vol. 15, issue 1, 101-123

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.

Date: 2006
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https://doi.org/10.1111/j.1530-9134.2006.00093.x

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