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Optimal Brand Umbrella Size

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Author Info

  • Cabral, L.M.B.

Abstract

In a framework or repeate -purchase experience goo s with seller's moral hazar , umbrella branding may improve the terms of the "implicit contract" between firm an consumers, whereby the ¯firm invests in quality an consumers p ay a high price. The reason is that the costs from cheating consumers are greater under umbrella branding (loss of reputation in all products), which implies that the high- uality equilibrium is more stable. The reverse side of this coin is that, if reputation breaks own in one pro uct (which is a istinct possibility in a worl with imperfect observability), then the ba news travel faster un er umbrella branding.

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Bibliographic Info

Paper provided by New York University, Leonard N. Stern School of Business- in its series New York University, Leonard N. Stern School Finance Department Working Paper Seires with number 01-06.

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Length: 15 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:fth:nystfi:01-06

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Postal: U.S.A.; New York University, Leonard N. Stern School of Business, Department of Economics . 44 West 4th Street. New York, New York 10012-1126
Phone: (212) 998-0100
Web page: http://w4.stern.nyu.edu/finance/
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Keywords: PRICES ; COSTS ; CONSUMERS ; CONTRACTS;

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References

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  1. Sullivan, Mary, 1990. "Measuring Image Spillovers in Umbrella-Branded Products," The Journal of Business, University of Chicago Press, vol. 63(3), pages 309-29, July.
  2. Choi, Chong Ju & Scarpa, Carlo, 1992. "Credible spatial preemption through reputation extension," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 439-447, September.
  3. Sappington, David E M & Wernerfelt, Birger, 1985. "To Brand or Not to Brand? A Theoretical and Empirical Question," The Journal of Business, University of Chicago Press, vol. 58(3), pages 279-93, July.
  4. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
  5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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Citations

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Cited by:
  1. Cabral, Luis M. B., 2003. "International merger policy coordination," Japan and the World Economy, Elsevier, vol. 15(1), pages 21-30, January.
  2. Hakenes, Hendrik & Peitz, Martin, 2004. "Umbrella Branding and the Provision of Quality," Sonderforschungsbereich 504 Publications 04-51, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  3. Hongbin Cai & Ichiro Obara, 2009. "Firm reputation and horizontal integration," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 340-363.
  4. Hakenes, Hendrik & Peitz, Martin, 2007. "Umbrella Branding and External Certification," CEPR Discussion Papers 6601, C.E.P.R. Discussion Papers.
  5. Cabral, Luís M B, 2003. "An Equilibrium Approach to International Merger Policy," CEPR Discussion Papers 3878, C.E.P.R. Discussion Papers.
  6. Fishman, Arthur & Finkelshtain, Israel & Simhon, Avi & Yacouel, Nira, 2008. "The Economics of Collective Brands," Discussion Papers 46056, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.

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