The Benefit of Collective Reputation

63 Pages Posted: 10 Jan 2017

See all articles by Zvika Neeman

Zvika Neeman

Tel Aviv University - Eitan Berglas School of Economics

Aniko Oery

Yale University - Cowles Foundation

Jungju Yu

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Multiple version iconThere are 2 versions of this paper

Date Written: December 30, 2016

Abstract

We study a model of collective reputation and use it to analyze the benefit of collective brands. Consumers form beliefs about the quality of an experience good that is produced by one firm that is part of a collective brand. Consumers’ limited ability to distinguish among firms in the collective and to monitor firms’ investment decisions creates incentives to free-ride on other firms’ investment efforts. Nevertheless, we show that collective brands induce stronger incentives to invest in quality than individual brands under two types of circumstances: if the main concern is with quality control and the baseline reputation of the collective is low, or if the main concern is with the acquisition of specialized knowledge and the baseline reputation of the collective is high. We also contrast the socially optimal information structure with the profit maximizing choice of branding if branding is endogenous. Our results can be applied to country-of-origin, agricultural appellation, and other collective brands.

Keywords: Branding, Collective Reputation, Commitment, Country of Origin

JEL Classification: C70, D21, D40, D70, L10, L50

Suggested Citation

Neeman, Zvika and Oery, Aniko and Yu, Jungju, The Benefit of Collective Reputation (December 30, 2016). Cowles Foundation Discussion Paper No. 2068, Available at SSRN: https://ssrn.com/abstract=2896165 or http://dx.doi.org/10.2139/ssrn.2896165

Zvika Neeman

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

HOME PAGE: http://www.tau.ac.il/~zvika/

Aniko Oery (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Jungju Yu

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro Dongdaemun-Gu
Seoul 02455
Korea, Republic of (South Korea)

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