A leverage theory of reputation building with co-branding: Complementarity in reputation building
AbstractWe present a leverage theory of reputation building with co-branding. We show that under certain conditions, co-branding that links unknown firms in a new sector with established firms in a mature sector allows the unknown firms to signal a high product quality and establish their own reputation. We compare this situation with a benchmark in which both sectors are new and firms signal their quality only with prices. We investigate how this comparison is affected by the nature of the technology linking the two sectors and a cross-sector inference problem that consumers might face in identifying the true cause of product failure. We find that co-branding facilitates the process in which a Þrm in the new sector to signal its product quality only if the co-branding sectors produce complementary inputs and consumers face a cross-sector inference problem. We apply our insight to economics of superstars, multinational firms and co-authorship.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1019.
Date of creation: Mar 2007
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Web page: http://www.econ.upf.edu/
Leverage; Co-branding; Complementarity in Reputation Building; Inference Problem;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-17 (All new papers)
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