Price elasticity of demand for consumer innovation
Consumer innovators increasingly engage in commercial distribution of their products. This work investigates how labelling the source of innovation as consumer made affects the price elasticity of demand. Our core results draw from a large-scale matched sample of 2754 pairs of consumer innovation branded and regular product sales data from a video game marketplace. The underlying processes are examined in a factorial survey with quantitative and qualitative parts. In low price areas, customers can relate to the unique motivational set of consumer innovators, who do not primarily innovate out of commercial interest. Knowing about their ulterior motives, customers do infer less non-monetary innovation effort reductions when prices are low. Negative low-price effects on demand are dampened. At high prices, customers are more trusting towards consumer innovators that their prices are justified by higher development effort rather than profit interest. This fosters price acceptance and reduces the perceived sacrifice of high consumer innovation prices compared to regular supply. Customers further notice superior creativity of consumer innovators and the hardships of individual product development. Consequently, compared to regular supply, the demand for consumer innovation labelled products is less sensitive to low or high prices. We render conclusions for consumer innovators’ pricing, marketplaces and policy makers. Attesting customers’ awareness of consumer entrepreneurial backgrounds and that it moderates marketing measures, we suggest further research in the area of consumer innovation marketing.