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Selling When Brand Image Matters

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  • Stefan Bühler
  • Daniel Halbheer

Abstract

This paper studies profit-maximizing seller behavior when brand image affects consumer 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 demonstrate that seller profits increase in the average degree of conformity in the opulation whereas the price remains unaffected.

Suggested Citation

  • Stefan Bühler & Daniel Halbheer, 2010. "Selling When Brand Image Matters," University of St. Gallen Department of Economics working paper series 2010 2010-14, Department of Economics, University of St. Gallen.
    • Handle: RePEc:usg:dp2010:2010-14
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    References listed on IDEAS

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    Cited by:

    1. Ansgar Wohlschlegel, 2011. "Quality Choice when Brand Image Matters," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(1), pages 122-125, March.
    2. Daniela Favaretto & Alessandro Marin & Marco Tolotti, 2021. "A data-driven and risk-based prudential approach to validate the DDMRP planning and control system," Working Papers 09, Department of Management, Università Ca' Foscari Venezia.
    3. Denter, Philipp, 2013. "A theory of communication in political campaigns," Economics Working Paper Series 1302, University of St. Gallen, School of Economics and Political Science.
    4. Jing‐Lin Duanmu & Maoliang Bu & Russell Pittman, 2018. "Does market competition dampen environmental performance? Evidence from China," Strategic Management Journal, Wiley Blackwell, vol. 39(11), pages 3006-3030, November.
    5. Tolotti, Marco & Yepez, Jorge, 2020. "Hotelling-Bertrand duopoly competition under firm-specific network effects," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 105-128.
    6. Buehler, Stefan & Halbheer, Daniel, 2012. "Persuading consumers with social attitudes," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 439-450.
    7. Felix Höffler, 2011. "Selling when Brand Image Matters," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(1), pages 119-121, March.
    8. Christoph Engel & Urs Schweizer, 2011. "Business-to-Consumer Transactions 28th International Seminar on the New Institutional Economics June 09-12, 2010, Budapest," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(1), pages 1-3, March.
    9. Jia Li & Zhengying Luo, 2021. "Product market competition and cost stickiness: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1808-1821, October.
    10. Vikander Nick, 2019. "Sellouts, Beliefs, and Bandwagon Behavior," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-21, January.

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    More about this item

    Keywords

    Quality; brand image; advertising; conformity; exclusivity;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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