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Measuring Brand Value in an Equilibrium Framework

Author

Listed:
  • Avi Goldfarb

    () (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • Qiang Lu

    () (Faculty of Economics and Business, University of Sydney, Sydney, NSW2006 Australia)

  • Sridhar Moorthy

    () (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

Abstract

We propose a structural approach to measuring brand and subbrand value using observational data. Brand value is defined as the difference in equilibrium profit between the brand in question and its counterfactual unbranded equivalent on search attributes. Our model allows us to make this computation rigorously, taking into account competitors' and retailers' reactions in the real and counterfactual situations. We illustrate our method using quarterly city-level data on ready-to-eat breakfast cereals, and compare our brand value estimates with those obtained from previously used reduced-form methods. A key advantage of our methodology is that it provides estimates of the value of brands to firms—manufacturers and retailers—taking into account the brand's value to consumers as well as its impact on firm decisions.

Suggested Citation

  • Avi Goldfarb & Qiang Lu & Sridhar Moorthy, 2009. "Measuring Brand Value in an Equilibrium Framework," Marketing Science, INFORMS, vol. 28(1), pages 69-86, 01-02.
  • Handle: RePEc:inm:ormksc:v:28:y:2009:i:1:p:69-86
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    File URL: http://dx.doi.org/10.1287/mksc.1080.0376
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    References listed on IDEAS

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    Cited by:

    1. Jiang, Renna & Manchanda, Puneet & Rossi, Peter E., 2009. "Bayesian analysis of random coefficient logit models using aggregate data," Journal of Econometrics, Elsevier, vol. 149(2), pages 136-148, April.
    2. L von Auer & M Trede, 2012. "The dynamics of brand equity: a hedonic regression approach to the laser printer market," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(10), pages 1351-1362, October.
    3. Baye, Michael R. & De los Santos, Babur & Wildenbeest, Matthijs R., 2016. "What’s in a name? Measuring prominence and its impact on organic traffic from search engines," Information Economics and Policy, Elsevier, vol. 34(C), pages 44-57.
    4. Ron Shachar & Tülin Erdem & Keisha M. Cutright & Gavan J. Fitzsimons, 2011. "Brands: The Opiate of the Nonreligious Masses?," Marketing Science, INFORMS, vol. 30(1), pages 92-110, 01-02.
    5. Bart J. Bronnenberg & Jean-Pierre Dubé & Matthew Gentzkow & Jesse M. Shapiro, 2015. "Do Pharmacists Buy Bayer? Informed Shoppers and the Brand Premium," The Quarterly Journal of Economics, Oxford University Press, vol. 130(4), pages 1669-1726.
    6. Michael R. Baye & Babur De los Santos & Matthijs R. Wildenbeest, 2016. "Search Engine Optimization: What Drives Organic Traffic to Retail Sites?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(1), pages 6-31, March.
    7. Yupin Yang & Mengze Shi & Avi Goldfarb, 2009. "Estimating the Value of Brand Alliances in Professional Team Sports," Marketing Science, INFORMS, vol. 28(6), pages 1095-1111, 11-12.
    8. Kusum Ailawadi & Eric Bradlow & Michaela Draganska & Vincent Nijs & Robert Rooderkerk & K. Sudhir & Kenneth Wilbur & Jie Zhang, 2010. "Empirical models of manufacturer-retailer interaction: A review and agenda for future research," Marketing Letters, Springer, vol. 21(3), pages 273-285, September.

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