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The Economics of Collective Brands

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Author Info

  • Arthur Fishman

    ()
    (Department of Economics, Bar Ilan University)

  • Israel Finkelstein

    (The Hebrew University)

  • Avi Simhon

    (The Hebrew University)

  • Nira Yacouel

    (The Hebrew University)

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    Abstract

    We consider the consequences of a shared brand name such as geographical names used to identify high quality products, for the incentives of otherwise autonomous firms to invest in quality. We contend that such collective brand labels improve communication between sellers and consumers, when the scale of production is too small for individual firms to establish reputations on a stand alone basis. This has two opposing effects on member firms’ incentives to invest in quality. On the one hand, it increases investment incentives by increasing the visibility and transparency of individual member firms, which increases the return from investment in quality. On the other hand, it creates an incentive to free ride on the group’s reputation, which can lead to less investment in quality. We identify parmater values under which collective branding delivers higher quality than is achievable by stand alone firms.

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    File URL: http://www.biu.ac.il/soc/ec/wp/2010-11.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, Bar-Ilan University in its series Working Papers with number 2010-11.

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    Date of creation: Jul 2010
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    Handle: RePEc:biu:wpaper:2010-11

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    Postal: Faculty of Social Sciences, Bar Ilan University 52900 Ramat-Gan
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    Web page: http://econ.biu.ac.il
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    1. Robert Evans & Timothy W. Guinnane, 2007. "Collective Reputation, Professional Regulation and Franchising," Cowles Foundation Discussion Papers 1627, Cowles Foundation for Research in Economics, Yale University.
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    Cited by:
    1. Garcia, Daniel, 2014. "Branding and Collusion in Vertically Differentiated Industries," MPRA Paper 54010, University Library of Munich, Germany.

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