Pricing strategy for co-created products in platform-based consumer innovation

Consumer innovation, which is the participation of consumers (or users) in product research and development, has become increasingly popular in recent years. Simultaneously, large technological advances on the internet have provided a convenient channel for consumers to contribute creative ideas in co-creation activity, providing an opportunity to rebuild our business ecosystem. We focus on how the platform impacts the process of consumer innovation. In this paper, we consider a setting in which a platform enterprise, a producer, and a group of consumers jointly design and produce a co-created product. In the co-creation process, the platform collects consumers’ ideas, sets three different innovation standards (i.e., practicality-oriented innovation, novelty-oriented innovation, and mixed innovation), and then sells the integrated idea to the producer. We demonstrate that each of the three innovation standards has its own scope of application, and no one standard is strictly dominant. Furthermore, a consumer is more willing to purchase the product with the increase in the effort exerted by himself when participating in a co-creation activity. Finally, we find that government subsidies for the platform enterprise are not always high-efficient in terms of increasing social welfare.