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The Economics of Collective Brands

Author

Listed:
  • Arthur Fishman

    (Department of Economics, Bar Ilan University)

  • Israel Finkelstein

    (The Hebrew University)

  • Avi Simhon

    (The Hebrew University)

  • Nira Yacouel

    (The Hebrew University)

Abstract

We consider the consequences of a shared brand name such as geographical names used to identify high quality products, for the incentives of otherwise autonomous firms to invest in quality. We contend that such collective brand labels improve communication between sellers and consumers, when the scale of production is too small for individual firms to establish reputations on a stand alone basis. This has two opposing effects on member firms’ incentives to invest in quality. On the one hand, it increases investment incentives by increasing the visibility and transparency of individual member firms, which increases the return from investment in quality. On the other hand, it creates an incentive to free ride on the group’s reputation, which can lead to less investment in quality. We identify parmater values under which collective branding delivers higher quality than is achievable by stand alone firms.

Suggested Citation

  • Arthur Fishman & Israel Finkelstein & Avi Simhon & Nira Yacouel, 2010. "The Economics of Collective Brands," Working Papers 2010-11, Bar-Ilan University, Department of Economics.
    • Handle: RePEc:biu:wpaper:2010-11
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    File URL: https://www2.biu.ac.il/soc/ec/wp/2010-11.pdf
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    References listed on IDEAS

    as
    1. Robert Evans & Timothy W Guinnane, 2007. "Collective Reputation, Professional Regulation and Franchising," Levine's Bibliography 122247000000001563, UCLA Department of Economics.
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    Cited by:

    1. Alexander E. Saak, 2012. "Collective Reputation, Social Norms, and Participation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 763-785.
    2. Alessandro Bonanno & Carlo Russo & Luisa Menapace, 2018. "Market power and bargaining in agrifood markets: A review of emerging topics and tools," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 6-23, December.
    3. Jie Bai & Ludovica Gazze & Yukun Wang, 2019. "Collective Reputation in Trade: Evidence from the Chinese Dairy Industry," CID Working Papers 366, Center for International Development at Harvard University.
    4. Jie Bai & Ludovica Gazze & Yukun Wang, 2019. "Collective Reputation in Trade: Evidence from the Chinese Dairy Industry," NBER Working Papers 26283, National Bureau of Economic Research, Inc.
    5. Garcia, Daniel, 2014. "Branding and Collusion in Vertically Differentiated Industries," MPRA Paper 54010, University Library of Munich, Germany.

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