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Selling When Brand Image Matters

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  • Stefan Bühler

    ()

  • Daniel Halbheer

    ()

Abstract

This paper studies profit-maximizing seller behavior when brand image affects consumer demand. We consider a seller facing a population of consumers with heterogeneous tastes regarding product quality and brand image. First, we analyze “active branding” by the seller through costly advertising. Our analysis shows that advertising, price and profits are all increasing in the average valuation of brand image in the population. Second, we examine the role of “passive branding” emanating from the population’s consumption of the product. We demonstrate that seller profits increase in the average degree of conformity in the opulation whereas the price remains unaffected.

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Bibliographic Info

Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2010 with number 2010-14.

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Length: 19 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:usg:dp2010:2010-14

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Keywords: Quality; brand image; advertising; conformity; exclusivity;

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References

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Cited by:
  1. Denter, Philipp, 2013. "A theory of communication in political campaigns," Economics Working Paper Series 1302, University of St. Gallen, School of Economics and Political Science.

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