Heterogeneous Consumers, Vertical Product Differentiation and the Rate of Innovation

Zweimüller, Josef and Brunner, Johann K. (June 1996) Heterogeneous Consumers, Vertical Product Differentiation and the Rate of Innovation. IHS Economics Series 32

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Abstract or Table of Contents

Abstract: This paper studies the impact of income inequality on the level of innovative activities in a model where innovations result in quality improvements. The market for quality goods is characterized by a natural oligopoly with three types of consumers - rich, middle class and poor. In general, we find that for reasons of strategic price setting a more equal distribution of income is favourable for innovation incentives. This is consistent with empirical evidence suggesting that countrieswith a more equal distribution of income have grown faster.;

Item Type: IHS Series
Keywords: 'Inequality' 'Income Distribution' 'Heterogeneity' 'Innovation' 'Endogeneous Growth' 'Product Quality' 'Vertical Product Differentiation'
Classification Codes (e.g. JEL): O31, L15, L16, D43, H23
Status: Published
Date Deposited: 26 Sep 2014 10:36
Last Modified: 24 Jul 2017 17:39
URI: http://irihs.ihs.ac.at/id/eprint/912

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