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The Dissipation of Profits by Brand Name Investment and Entry when Price Guarantees Quality

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  • Rogerson, William P

Abstract

Two previous models of the dissipation of profits generated by the use of quality-guaranteeing prices assumed that pro fits were dissipated through investment in brand-name capital and ent ry. The model of this paper allows both possibilities. It is shown th at both types of dissipation will, in general, occur and that brand-n ame investment will dissipate a greater share of profits as the elast icity of consumer response to brand-name investment grows larger. Copyright 1987 by University of Chicago Press.

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  • Rogerson, William P, 1987. "The Dissipation of Profits by Brand Name Investment and Entry when Price Guarantees Quality," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 797-809, August.
  • Handle: RePEc:ucp:jpolec:v:95:y:1987:i:4:p:797-809
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    Cited by:

    1. Caves, Richard E. & Greene, David P., 1996. "Brands' quality levels, prices, and advertising outlays: empirical evidence on signals and information costs," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 29-52.
    2. Haucap, Justus & Wey, Christian & Barmbold, Jens, 2000. "Location costs, product quality and implicit franchise contracts," Journal of International Economics, Elsevier, vol. 52(1), pages 69-87, October.
    3. Landon, Stuart & Smith, Constance, 1997. "The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine," MPRA Paper 9283, University Library of Munich, Germany.
    4. Dana, James D, Jr, 2001. "Competition in Price and Availability When Availability is Unobservable," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 497-513, Autumn.
    5. Rasmusen, Eric, 2017. "A model of trust in quality and North–South trade," Research in Economics, Elsevier, vol. 71(1), pages 159-170.
    6. D Vandegrift, 2001. "Quality-Assuring Price And Breach Of Express Or Implied Warranty," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 186-196, April.

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