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Optimal Brand Umbrella Size

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Author Info

  • 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
Date of revision:
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. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  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. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
  4. 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.
  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.
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Cited by:
  1. 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.
  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, 2008. "Firm Reputation and Horizontal Integration," Levine's Working Paper Archive 122247000000002038, David K. Levine.
  4. Cabral, Luis M.B., 2005. "An equilibrium approach to international merger policy," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 739-751, December.
  5. Cabral, Luis M. B., 2003. "International merger policy coordination," Japan and the World Economy, Elsevier, vol. 15(1), pages 21-30, January.
  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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