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