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Brand spillovers as shadow enforcement: Endogenous liability regimes in correlated experience goods markets

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  • Chen, Yizheng
  • Li, Jingkui
  • Tian, Guoqiang

Abstract

This paper develops a reputational equilibrium model for correlated experience goods markets with imperfect monitoring, incorporating strategic cross-market brand externalities. The central theoretical innovation demonstrates how high-end market brand spillover effects endogenously reshape quality incentives: High-end brand externalities create implicit liability constraints, sustaining Markov perfect equilibrium in quality provision without formal liability regimes when spillover intensity exceeds critical thresholds. Low-end markets replicate single-market failure patterns, necessitating hybrid reputation-liability mechanisms. The model provides microfoundations for international quality differentiation strategies, illustrating how developed economies can leverage emerging market participation to reduce domestic regulatory burdens while maintaining quality standards.

Suggested Citation

  • Chen, Yizheng & Li, Jingkui & Tian, Guoqiang, 2026. "Brand spillovers as shadow enforcement: Endogenous liability regimes in correlated experience goods markets," Mathematical Social Sciences, Elsevier, vol. 140(C).
    • Handle: RePEc:eee:matsoc:v:140:y:2026:i:c:s0165489626000193
    DOI: 10.1016/j.mathsocsci.2026.102512
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