Evolutionary Product Differentiation And Market Creation In Turbulent Economic Environments^∗

Abstract

The assumption of given consumer tastes and production, loses ground very rapidly in information-intensive economic systems, where the ability to design products and services combinations for increasingly specific needs and skills is a key variable to competition. This article presents a search-oriented conceptual framework and proposes a schematic representation of endogenous product differentiation. The evolution of users' and producers' discriminating capabilities is shown to govern their interaction leading to product definition. Patterns of sub-market creation or standardization provide a central building block to market creation analysis.