The Economics of Collective Brands

42 Pages Posted: 3 Oct 2010  

Arthur Fishman

Bar-Ilan University - Department of Economics

Avi Simhon

Hebrew University of Jerusalem

Israel Finkelshtain

Hebrew University of Jerusalem

Nira Yacouel

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: September 12, 2010

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

Fishman, Arthur and Simhon, Avi and Finkelshtain, Israel and Yacouel, Nira, The Economics of Collective Brands (September 12, 2010). Bar-Ilan University Department of Economics Research Paper No. 2010-11. Available at SSRN: https://ssrn.com/abstract=1675707 or http://dx.doi.org/10.2139/ssrn.1675707

Arthur Fishman (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
972-3-531-8366 (Phone)
972 3 535 3180 (Fax)

Avi Simhon

Hebrew University of Jerusalem ( email )

Mount Scopus
Jerusalem 91905, IL 91905
Israel
+972 2 588 3237 (Phone)
+972 2 581 6071 (Fax)

Israel Finkelshtain

Hebrew University of Jerusalem ( email )

Mount Scopus
Jerusalem 91905, IL 91905
Israel
+08-9489255 (Phone)

Nira Yacouel

affiliation not provided to SSRN ( email )

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