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The Costs and Benefits of Collective Reputation: Who gains and who loses from generic promotion programs?

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Listed:
  • Gergaud, Olivier
  • Livat, Florine
  • Rickard, Bradley
  • Warzynski, Frederic

Abstract

In this paper we develop an original approach to evaluate the costs and benefits associated to a generic promotion program using an application to Bordeaux wines. The benefit is computed from the marginal impact of the collective reputation of the program on the individual reputation of its members. These different marginal impacts are estimated using detailed survey data about the image of Bordeaux wines in seven European countries. We find positive and significant spillover effects from the umbrella reputation (Bordeaux) that moreover increase with the individual reputation level of the wine. Controlling for the natural endogeneity of the collective reputation in this setup, we capture the important fact that this relationship is faced with marginal diminishing returns. These spillover effects, when significantly positive, vary from a minimum of 5% to a maximum of 15% of additional favorable quality opinions. We then show that some subregions are more likely to benefit from generic promotion programs, suggesting that fees should be established on a benefit-cost basis.

Suggested Citation

  • Gergaud, Olivier & Livat, Florine & Rickard, Bradley & Warzynski, Frederic, 2016. "The Costs and Benefits of Collective Reputation: Who gains and who loses from generic promotion programs?," Working Papers 231135, American Association of Wine Economists.
  • Handle: RePEc:ags:aawewp:231135
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    References listed on IDEAS

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    1. Choi, Chong Ju & Soo Hee Lee & Donghoon Oh, 1995. "The strategy of grouping and reputation linkage in clubs and multi-product firms," European Journal of Political Economy, Elsevier, vol. 11(3), pages 521-533, September.
    2. Marco Costanigro & Jill J. McCluskey & Christopher Goemans, 2010. "The Economics of Nested Names: Name Specificity, Reputations, and Price Premia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(5), pages 1339-1350.
    3. repec:oup:revage:v:29:y:2007:i:1:p:40-63. is not listed on IDEAS
    4. Bradley J. Rickard & Jura Liaukonyte & Harry M. Kaiser & Timothy J. Richards, 2011. "Consumer Response to Commodity-Specific and Broad-Based Promotion Programs for Fruits and Vegetables," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1312-1327.
    5. Jason A. Winfree & Jill J. McCluskey, 2005. "Collective Reputation and Quality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 206-213.
    6. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 1-22.
    7. 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.
    8. Julian M. Alston & John M. Crespi & Harry M. Kaiser & Richard J. Sexton, 2007. "An Evaluation of California's Mandated Commodity Promotion Programs," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(1), pages 40-63.
    9. repec:oup:revage:v:25:y:2003:i:2:p:294-315. is not listed on IDEAS
    10. John M. Crespi, 2003. "The Generic Advertising Controversy: How Did We Get Here and Where Are We Going?," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 294-315.
    11. Landon, Stuart & Smith, Constance, 1998. "Quality expectations, reputation, and price," MPRA Paper 9774, University Library of Munich, Germany.
    12. Capacci, Sara & Mazzocchi, Mario, 2011. "Five-a-day, a price to pay: An evaluation of the UK program impact accounting for market forces," Journal of Health Economics, Elsevier, vol. 30(1), pages 87-98, January.
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    More about this item

    Keywords

    Benefit-cost analysis; Individual reputation; Collective reputation; Bordeaux wines; Appellations; Demand and Price Analysis; Marketing; L15; L66; Q13; Z13;

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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