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Expected Firm Altruism, Quality Provision, and Brand Extensions

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  • Julio J. Rotemberg

    (Harvard Business School, Boston, Massachusetts 02163)

Abstract

A setting is considered where consumers keep track of the extent to which brands care about them, which is modeled as altruism of brands toward their target consumers. Consumers who purchase an experience good of high quality reasonably deduce that the supplier of this good is relatively altruistic toward them, and they are therefore more keen to purchase a brand extension that is also directed at them. As a result, the success of brand extensions depends on the overlap between the customers of the original product and the target customers of the extension product. The quality and demand for a brand extension can be higher if the brand is perceived as caring only for its most quality-conscious consumers rather than for all possible buyers of the good.

Suggested Citation

  • Julio J. Rotemberg, 2013. "Expected Firm Altruism, Quality Provision, and Brand Extensions," Marketing Science, INFORMS, vol. 32(2), pages 325-341, March.
  • Handle: RePEc:inm:ormksc:v:32:y:2013:i:2:p:325-341
    DOI: 10.1287/mksc.1120.0765
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    References listed on IDEAS

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    Cited by:

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    2. Gerrath, Maximilian H.E.E. & Biraglia, Alessandro, 2021. "How less congruent new products drive brand engagement: The role of curiosity," Journal of Business Research, Elsevier, vol. 127(C), pages 13-24.

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