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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Auriol, Emmanuelle / Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias / Zulehner, Christine

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Volume 16, Issue 4


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Process and Product Innovation and the Role of the Preference Function

Andreas Hoefele
Published Online: 2017-01-19 | DOI: https://doi.org/10.1515/bejeap-2013-0132


In this paper I investigate the relationship between firms’ investment in product and process innovation, in particular how this relationship is affected by the consumer’s valuation for variety. Depending on the strength of the consumer’s value of variety, the aggregate demand increases with a higher degree of product innovation, which I call the market-expansion effect. I show that the two types of investment are positively related if the market expansion effect is strong.

Keywords: preference function; process innovation; product innovation


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About the article

Published Online: 2017-01-19

Published in Print: 2016-10-01

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 16, Issue 4, 20130132, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2013-0132.

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