Selling when Brand Image Matters
AbstractThis paper studies profit-maximizing seller behavior when brand image affects demand. We consider a seller facing a population of consumers with heterogeneous tastes regarding product quality and brand image. First, we analyze active branding by the seller through costly advertising. Our analysis shows that advertising, price, and profits are all increasing in the average valuation of brand image in the population. Second, we examine the role of passive branding emanating from the population's consumption of the product. We find that seller profits increase in the average degree of conformity in the population, whereas the price remains unaffected.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 167 (2011)
Issue (Month): 1 (March)
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Other versions of this item:
- Stefan Bühler & Daniel Halbheer, 2010. "Selling When Brand Image Matters," University of St. Gallen Department of Economics working paper series 2010 2010-14, Department of Economics, University of St. Gallen.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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