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. Closed Series > Working Paper Series > 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: 03 Mar 2019 06:48
URI: https://irihs.ihs.ac.at/id/eprint/912

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