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Linking Reputations: The Signaling and Feedback Effects of Umbrella Branding

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  • Miklos-Thal, Jeanine

Abstract

This paper develops a theory of umbrella branding as a way to link the reputations of otherwise unrelated products. I show that while umbrella branding can credibly signal positive quality correlation, there are no equilibria in which umbrella branding either fully reveals high quality, or signals negative quality correlation. Finally, whenever umbrella branding signals perfect positive quality correlation, firms that already produce high quality products have stronger incentives to invest in developing further high quality products than firms that are currently inactive or produce low quality products.

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File URL: http://mpra.ub.uni-muenchen.de/11045/
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File URL: http://mpra.ub.uni-muenchen.de/26853/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11045.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:11045

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Related research

Keywords: reputation; umbrella branding; brand extensions; quality signaling;

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References

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  1. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  2. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
  3. Birger Wernerfelt, 1988. "Umbrella Branding as a Signal of New Product Quality: An Example of Signalling by Posting a Bond," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 458-466, Autumn.
  4. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
  5. Pil Choi, J., 1997. "Brand Extension as Informational Leverage," ISER Discussion Paper 0451, Institute of Social and Economic Research, Osaka University.
  6. Steven Tadelis, 1999. "What's in a Name? Reputation as a Tradeable Asset," American Economic Review, American Economic Association, vol. 89(3), pages 548-563, June.
  7. Hendrik Hakenes & Martin Peitz, 2004. "Umbrella Branding and the Provision of Quality," CESifo Working Paper Series 1373, CESifo Group Munich.
  8. 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.
  9. Lynne M. Pepall, 2002. "The Simple Economics of Brand Stretching," The Journal of Business, University of Chicago Press, vol. 75(3), pages 535-552, July.
  10. 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.
  11. Andersson, Fredrik, 2002. "Pooling reputations," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 715-730, May.
  12. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
  13. Luis M.B. Cabral, 2000. "Stretching Firm and Brand Reputation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 658-673, Winter.
  14. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, September.
  15. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
  16. Grossman, Gene, 1986. "Counterfeit Product Trade," CEPR Discussion Papers 103, C.E.P.R. Discussion Papers.
  17. Cabral, Luís M.B., 2009. "Umbrella branding with imperfect observability and moral hazard," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 206-213, March.
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Cited by:
  1. Luís Almeida Costa & Luís Vasconcelos, 2010. "Share the Fame or Share the Blame? The Reputational Implications of Partnerships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 259-301, 06.
  2. Drasko Nikolic & Dusko Bodroza, 2012. "Positioning and Re-positioning of National Brand of Serbia in order to Increase to Increase Exports, Foreign Direct Investments and Tourism Development," Book Chapters, Institute of Economic Sciences.

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