IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v13y1994i2p177-189.html
   My bibliography  Save this article

Signaling Quality by Selling Through a Reputable Retailer: An Example of Renting the Reputation of Another Agent

Author

Listed:
  • Wujin Chu

    (Seoul National University, Office of the President, Republic of Korea)

  • Woosik Chu

    (Seoul National University, Office of the President, Republic of Korea)

Abstract

This paper gives an example of renting the reputation of another agent to signal quality. We show that in a “maximally” separating equilibrium, manufacturers of high quality products distribute through retailers with strong reputation (reputable retailers), while manufacturers of low quality products distribute through retailers with no reputation (discounters). In this way, even if high quality manufacturers have no reputation of their own to post as bond, they can signal quality by posting the reputation of the retailers. In equilibrium, reputable retailers never default on their reputation. We also show that it pays the retailers to invest in reputation, as reputable retailers earn profits bounded away from zero under endogenous sequential entry, while the discounters' profits are zero.

Suggested Citation

  • Wujin Chu & Woosik Chu, 1994. "Signaling Quality by Selling Through a Reputable Retailer: An Example of Renting the Reputation of Another Agent," Marketing Science, INFORMS, vol. 13(2), pages 177-189.
    • Handle: RePEc:inm:ormksc:v:13:y:1994:i:2:p:177-189
    DOI: 10.1287/mksc.13.2.177
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.13.2.177
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mksc.13.2.177?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:13:y:1994:i:2:p:177-189. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.