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The benefit of collective reputation

Author

Listed:
  • Zvika Neeman
  • Aniko Öry
  • Jungju Yu

Abstract

We study a model of reputation with two long‐lived firms who operate under a collective brand or as two individual brands. Firms' investments in quality are unobserved and can only be sustained through reputational concerns. In a collective brand, consumers cannot distinguish between the two firms. In the long run, this generates incentives to free‐ride on the other firm's investment, but in the short run, it mitigates the temptation to milk a good reputation. The signal structure and consumers' prior beliefs determine which effect dominates. We interpret our findings in light of the type of industry in which the firms operate.

Suggested Citation

  • Zvika Neeman & Aniko Öry & Jungju Yu, 2019. "The benefit of collective reputation," RAND Journal of Economics, RAND Corporation, vol. 50(4), pages 787-821, December.
    • Handle: RePEc:bla:randje:v:50:y:2019:i:4:p:787-821
    DOI: 10.1111/1756-2171.12296
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    Cited by:

    1. Jungju Yu, 2021. "A Model of Brand Architecture Choice: A House of Brands vs. A Branded House," Marketing Science, INFORMS, vol. 40(1), pages 147-167, January.
    2. Bar-El, Ronen & Hatsor, Limor & Tobol, Yossef, 2020. "Home production, market substitutes, and the labor supply of mothers," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 378-390.
    3. Somdutta Basu & Suraj Shekhar, 2021. "What's In A Name? Reputation and Monitoring in the Audit Market," Working Papers 60, Ashoka University, Department of Economics.
    4. Yan, Wenshou & Cai, Yan & Guo, Xuan, 2023. "How can trade partners be chosen when facing food scandals? China's milk scandal as a natural experiment," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(04), August.
    5. Zijun (June) Shi & Kannan Srinivasan & Kaifu Zhang, 2023. "Design of Platform Reputation Systems: Optimal Information Disclosure," Marketing Science, INFORMS, vol. 42(3), pages 500-520, May.
    6. Jianyu Yu & Dongling Cai & Qiang Gong & Jiaying Mo, 2024. "Food safety, voluntary recall and firm reputation," Pacific Economic Review, Wiley Blackwell, vol. 29(3), pages 397-418, August.
    7. T. Tony Ke & Jiwoong Shin & Jungju Yu, 2023. "A Model of Product Portfolio Design: Guiding Consumer Search Through Brand Positioning," Marketing Science, INFORMS, vol. 42(6), pages 1101-1124, November.
    8. Yildirim, Huseyin, 2025. "The economics of career concerns in teamwork," Journal of Economic Theory, Elsevier, vol. 226(C).

    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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