Umbrella Branding and External Certification
AbstractIn a market environment with random detection of product quality, a firm can employ umbrella branding as a strategy to convince consumers of the high quality of its products. Alternatively, a firm can rely on external certification of the quality of one or both of its products. We characterize equilibria in which umbrella branding fully or partially substitutes for external certification. We also show that the potential to signal quality is improved if consumers condition their beliefs on the source of information, namely whether information comes from external certification or from random detection.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6601.
Date of creation: Dec 2007
Date of revision:
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Other versions of this item:
- Hendrik Hakenes & Martin Peitz, 2008. "Umbrella Branding and External Certification," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_10, Max Planck Institute for Research on Collective Goods.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-19 (All new papers)
- NEP-IND-2007-12-19 (Industrial Organization)
- NEP-LAB-2007-12-19 (Labour Economics)
- NEP-MIC-2007-12-19 (Microeconomics)
- NEP-MKT-2007-12-19 (Marketing)
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