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Brand Extension as Informational Leverage

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Author Info
Choi, Jay Pil

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Abstract

The marketing literature refers to the concept of brand capital and provides empirical evidence that firms with a large stock of well-established brands have an advantage in introducing new products. This paper develops a theory of brand extension as a mechanism for informational leverage in which a firm leverages off a good's reputation in one market to alleviate the problem of informational asymmetry encountered in other markets. It is shown that brand extension helps a multiproduct monopolist introduce a new experience good with less price distortion. Thus, the paper provides a theoretical foundation for the concept of brand capital. Copyright 1998 by The Review of Economic Studies Limited.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 65 (1998)
Issue (Month): 4 (October)
Pages: 655-69
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Handle: RePEc:bla:restud:v:65:y:1998:i:4:p:655-69

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  1. Ken Hendricks & Alan Sorensen, 2006. "Information Spillovers in the Market for Recorded Music," NBER Working Papers 12263, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Lynne Pepall & Dan Richards, 1999. "The Simple Economics of "Brand-Stretching"," Discussion Papers Series, Department of Economics, Tufts University 9905, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  3. Olivier Gergaud & Florine Livat, 2004. "Team versus individual reputations : a model of interaction and some empirical evidence," Cahiers de la Maison des Sciences Economiques bla04015, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  4. Martin Peitz & Paolo G. Garella, 1999. "- Exclusive Dealing Clauses Facilitate Entry," Working Papers. Serie AD 1999-17, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
    Other versions:
  5. Tianxi Wang, 2007. "The Reputation of an Organization and its Dynamics," Economics Discussion Papers 637, University of Essex, Department of Economics. [Downloadable!]
  6. Giovanni B. Ramello, 2004. "Intellectual property and the markets of ideas," LIUC Papers in Economics 161, Cattaneo University (LIUC). [Downloadable!]
    Other versions:
  7. Hendrik Hakenes & Martin Peitz, 2006. "Umbrella Branding and the Provision of Quality," Discussion Papers 132, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  8. Thomas Liebi, 2002. "Monitoring Eco-Labels: You Can Have Too Much of a Good Thing," Diskussionsschriften dp0207, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  9. Hendrik Hakenes & Martin Peitz, 2004. "Selling Reputation When Going out of Business, June 2004," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  10. Thomas Liebi, 2002. "Trusting Labels: A Matter of Numbers?," Diskussionsschriften dp0201, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  11. Luis Garicano & Tano Santos, 2004. "Referrals," American Economic Review, American Economic Association, vol. 94(3), pages 499-525, June. [Downloadable!] (restricted)
    Other versions:
    • Luis Garicano & Tano Santos, 2001. "Referrals," NBER Working Papers 8367, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Jay Pil Choi & Doh-Shin Jeon, 2007. "A Leverage Theory of Reputation Building with Co-branding: Complementarity in Reputation Building," Economics Working Papers 1019, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  13. Hakenes, Hendrik & Peitz, Martin, 2004. "Selling Reputation When Going out of Business," Sonderforschungsbereich 504 Publications 04-52, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  14. Luigi Luini & Andrea Mangani, 2004. "Trademarks, Product Variety, and Economic Activity in Italy and Europe," Department of Economics University of Siena 422, Department of Economics, University of Siena. [Downloadable!]
  15. Hendrik Hakenes & Martin Peitz, 2006. "Observable Reputation Trading," Discussion Papers 131, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
    • Hendrik Hakenes & Martin Peitz, 2007. "Observable Reputation Trading," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 693-730, 05. [Downloadable!] (restricted)
  16. Martin Peitz, 2000. "Exclusionary Practices and Entry Under Asymmetric Information," Econometric Society World Congress 2000 Contributed Papers 1197, Econometric Society. [Downloadable!]
  17. Georg von Graevenitz, 2007. "Which Reputations Does a Brand Owner Need? Evidence from Trade Mark Opposition," Discussion Papers 215, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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