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Measuring Brand Value in an Equilibrium Framework

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Author Info

  • Avi Goldfarb

    ()
    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • Qiang Lu

    ()
    (Faculty of Economics and Business, University of Sydney, Sydney, NSW2006 Australia)

  • Sridhar Moorthy

    ()
    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

Abstract

We propose a structural approach to measuring brand and subbrand value using observational data. Brand value is defined as the difference in equilibrium profit between the brand in question and its counterfactual unbranded equivalent on search attributes. Our model allows us to make this computation rigorously, taking into account competitors' and retailers' reactions in the real and counterfactual situations. We illustrate our method using quarterly city-level data on ready-to-eat breakfast cereals, and compare our brand value estimates with those obtained from previously used reduced-form methods. A key advantage of our methodology is that it provides estimates of the value of brands to firms—manufacturers and retailers—taking into account the brand's value to consumers as well as its impact on firm decisions.

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File URL: http://dx.doi.org/10.1287/mksc.1080.0376
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Bibliographic Info

Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 28 (2009)
Issue (Month): 1 (01-02)
Pages: 69-86

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Handle: RePEc:inm:ormksc:v:28:y:2009:i:1:p:69-86

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Related research

Keywords: branding; brand equity measurement; new empirical industrial organization;

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References

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  1. Mills, David E, 1999. "Private Labels and Manufacturer Counterstrategies," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(2), pages 125-45, June.
  2. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  3. Cotterill, Ronald W. & Putsis, William P., Jr. & Dhar, Ravi, 2000. "Market Share and Price Setting Behavior For Private Labels and National Brands," Research Reports 25209, University of Connecticut, Food Marketing Policy Center.
  4. Robert L. Steiner, 2004. "The Nature and Benefits of National Brand/Private Label Competition," Review of Industrial Organization, Springer, vol. 24(2), pages 105-127, 03.
  5. Jean-Philippe Gervais & Stephen Devadoss, 2006. "Estimating bargaining strengths of Canadian chicken producers and processors using a bilateral monopoly framework," Agribusiness, John Wiley & Sons, Ltd., vol. 22(2), pages 159-173.
  6. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, vol. 73(1), pages 109-37, January.
  7. Bontems, Philippe & Monier-Dilhan, Sylvette & Requillart, Vincent, 1999. "Strategic Effects of Private Labels," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(2), pages 147-65, June.
  8. Li Tian & Ronald W. Cotterill, 2005. "Constrained price, address, or logit brand demand models: An econometric comparison in the Boston fluid milk market," Agribusiness, John Wiley & Sons, Ltd., vol. 21(2), pages 149-166.
  9. Bonanno Alessandro & Lopez Rigoberto A., 2005. "Private Label Expansion and Supermarket Milk Prices," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 3(1), pages 1-18, February.
  10. Ronald W. Cotterill & William P. Putsis Jr. & Ravi Dhar, 2000. "Market Share and Price Setting Behavior For Private Labels and National Brands," Food Marketing Policy Center Research Reports 051, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  11. Jagmohan S. Raju & Raj Sethuraman & Sanjay K. Dhar, 1995. "The Introduction and Performance of Store Brands," Management Science, INFORMS, vol. 41(6), pages 957-978, June.
  12. Mills, David E, 1995. "Why Retailers Sell Private Labels," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 509-28, Fall.
  13. S. Chan Choi, 1991. "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, INFORMS, vol. 10(4), pages 271-296.
  14. Narasimhan, Chakravarthi & Wilcox, Ronald T, 1998. "Private Labels and the Channel Relationship: A Cross-Category Analysis," The Journal of Business, University of Chicago Press, vol. 71(4), pages 573-600, October.
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Citations

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Cited by:
  1. Jiang, Renna & Manchanda, Puneet & Rossi, Peter E., 2009. "Bayesian analysis of random coefficient logit models using aggregate data," Journal of Econometrics, Elsevier, vol. 149(2), pages 136-148, April.
  2. Ailawadi, K.H. & Bradlow, E.T. & Draganska, M. & Nijs, V. & Rooderkerk, R.P. & Sudhir, K. & Wilbur, K.C. & Zhang, J., 2010. "Empirical models of manufacturer-retailer interaction: A review and agenda for future research," Open Access publications from Tilburg University urn:nbn:nl:ui:12-4163972, Tilburg University.
  3. Ludwig von Auer & Mark Trede, 2010. "The Dynamics of Brand Equity: A Hedonic Regression Approach to the Laser Printer Market," CQE Working Papers 1210, Center for Quantitative Economics (CQE), University of Muenster.
  4. Michael R. Baye & Babur De los Santos & Matthijs R. Wildenbeest, 2012. "What's in a Name? Measuring Prominence, and its Impact on Organic Traffic from Search Engines," Working Papers 2012-09, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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