Selling when Brand Image Matters
This paper studies profit-maximizing seller behavior when brand image affects 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 find that seller profits increase in the average degree of conformity in the population, whereas the price remains unaffected.
Volume (Year): 167 (2011)
Issue (Month): 1 (March)
|Contact details of provider:|| Web page: https://www.mohr.de/jite|
|Order Information:|| Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Erdem, Tulin & Broniarczyk, Susan & Charavarti, Dipankar & Kapferer, Jean-Noel & Keane, Michael & Roberts, John & Steenkamp, Jan-Benedict & Swait, Joffre & Zettelmeyer, Florian, 1999. "Brand Equity, Consumer Learning and Choice," MPRA Paper 53022, University Library of Munich, Germany.
- Anette Boom & Pio Baake, .
"Vertical Product Differentiation, Network Externalities, and Compatibility Decisions,"
010, Departmental Working Papers.
- Baake, Pio & Boom, Anette, 2001. "Vertical product differentiation, network externalities, and compatibility decisions," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 267-284, January.
- Athey, Susan & Schmutzler, Armin, 2001. "Investment and Market Dominance," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 1-26, Spring.
- Gabszewicz, Jean J. & Laussel, Didier & Sonnac, Nathalie, 2005.
"Does advertising lower the price of newspapers to consumers? A theoretical appraisal,"
Elsevier, vol. 87(1), pages 127-134, April.
- Jean J, Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Does Advertising Lower the Price of Newspapers to Consumers ? A Theoretical Appraisal," Working Papers 2004-40, Centre de Recherche en Economie et Statistique.
- GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, . "Does advertising lower the price of newspapers to consumers? A theoretical appraisal," CORE Discussion Papers RP 1760, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Von der Fehr, N.H.M. & Stevik, K., 1996.
"Persuasive Advertising and Product Differentiation,"
01/1996, Oslo University, Department of Economics.
- Nils-Henrik M. von der Fehr & Kristin Stevik, 1998. "Persuasive Advertising and Product Differentiation," Southern Economic Journal, Southern Economic Association, vol. 65(1), pages 113-126, July.
- Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, vol. 70(1), pages 133-155, October.
- Pesendorfer, Wolfgang, 1995.
"Design Innovation and Fashion Cycles,"
American Economic Review,
American Economic Association, vol. 85(4), pages 771-92, September.
- Kevin Lane Keller & Donald R. Lehmann, 2006. "Brands and Branding: Research Findings and Future Priorities," Marketing Science, INFORMS, vol. 25(6), pages 740-759, 11-12.
- Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
- GRILO, Isabel & SHY, Oz & THISSE, Jacques-François, .
"Price competition when consumer behavior is characterized by conformity or vanity,"
CORE Discussion Papers RP
1518, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Grilo, Isabel & Shy, Oz & Thisse, Jacques-Francois, 2001. "Price competition when consumer behavior is characterized by conformity or vanity," Journal of Public Economics, Elsevier, vol. 80(3), pages 385-408, June.
- GRILO, Isabel & SHY, Oz & THISSE, Jacques-François, 1997. "Price competition when consumer behavior is characterized by conformity or vanity," CORE Discussion Papers 1997032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-73, June.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
- Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
- Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
When requesting a correction, please mention this item's handle: RePEc:mhr:jinste:urn:sici:0932-4569(201103)167:1_102:swbim_2.0.tx_2-0. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert)
If references are entirely missing, you can add them using this form.