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Optimal Brand Umbrella Size

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  • Luis M. B. Cabral

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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File URL: http://w4.stern.nyu.edu/emplibrary/0101umbrellaMar07.pdf
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Bibliographic Info

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

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Date of creation: 2001
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Handle: RePEc:ste:nystbu:01-06

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Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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References

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  1. Hongbin Cai & Ichiro Obara, 2006. "Firm Reputation and Horizontanl Integration," Levine's Bibliography 321307000000000285, UCLA Department of Economics.
  2. 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.
  3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  4. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
  5. 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.
  6. 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.
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Cited by:
  1. Hakenes, Hendrik & Peitz, Martin, 2007. "Umbrella Branding and External Certification," CEPR Discussion Papers 6601, C.E.P.R. Discussion Papers.
  2. Hendrik Hakenes & Martin Peitz, 2004. "Umbrella Branding and the Provision of Quality," CESifo Working Paper Series 1373, CESifo Group Munich.
  3. Cabral, Luís M B, 2003. "An Equilibrium Approach to International Merger Policy," CEPR Discussion Papers 3878, C.E.P.R. Discussion Papers.
  4. Hongbin Cai & Ichiro Obara, 2009. "Firm reputation and horizontal integration," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 340-363.
  5. 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.
  6. Cabral, Luis M. B., 2003. "International merger policy coordination," Japan and the World Economy, Elsevier, vol. 15(1), pages 21-30, January.

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