7. OTHER TYPES OF INNOVATIONS

The model in Figure 2 could also handle the process innovations in our sample. In the case of three of the four such innovations in our sample, there was no apparent effect on product prices. By lowering the costs of the innovators, these process innovations increased the innovator's profits. Also, since they were imitated (at nominal cost) by other firms, they soon increased the profits of other firms as well. The total decrease in costs (which equals the increase in profits) of all the relevant firms equals the social saving in resources due to the innovation. For the fourth process innovation, the product price was reduced, and the situation was essentially the same as in Figure 2.

Turning to product innovation used by households, the same model could be applied because all of the innovations of this type in our sample were meant to reduce the cost of some household activity. The extent to which this will be true for ATP-funded projects of this kind is hard to say.

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Date created: June 15, 2006
Last updated: June 16, 2006

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