The Economics of Collective Brands

Arthur Fishman (), Israel Finkelstein, Avi Simhon and Nira Yacouel
Additional contact information
Arthur Fishman: Department of Economics, Bar Ilan University
Israel Finkelstein: The Hebrew University
Avi Simhon: The Hebrew University
Nira Yacouel: The Hebrew University

No 2010-11, Working Papers from Bar-Ilan University, Department of Economics

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.

Date: 2010-07
New Economics Papers: this item is included in nep-agr and nep-mkt
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Citations: View citations in EconPapers (5)

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