Collective Reputation Effects: An Empirical Appraisal

Abstract

This paper tests Tirole (1996)’s theory about the link between individual and collective reputation. We estimate an interaction model in which a single collective reputation both determines and is determined by a series of individual reputations. 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 collective reputation in this setup, allows to capture the important fact that this relationship is faced with marginal diminishing returns. In other words that the marginal impact of Bordeaux as an umbrella brand actually tends to decrease to zero (and not to increase in a linear way) as the reputation level of its entities goes up. These spillover effects, when significantly positive, vary from a minimum of 5% to a maximum of 15% of additional favorable quality opinions.

Keywords: Individual Reputation, Collective Reputation, Bordeaux Wines

JEL Classification: L15, L66, Z13