Umbrella branding with imperfect observability and moral hazard

Luis M B Cabral ()

International Journal of Industrial Organization, 2009, vol. 27, issue 2, pages 206-213

Abstract: In a framework of repeated-purchase experience goods with seller's moral hazard and imperfect monitoring, umbrella branding may improve the terms of the implicit contract between seller and buyers, whereby the seller invests in quality and buyers pay a high price. In some cases, umbrella branding leads to a softer punishment of product failure, which increases the seller's value. In other cases, umbrella branding leads to a harsher punishment of product failure, which allows for a reputational equilibrium that would otherwise be impossible. On the negative side, under umbrella branding one bad signal may kill two revenue streams, not one. Combining costs and benefits, I determine the set of parameter values such that umbrella branding is an optimal strategy.

Keywords: Branding; Repeated; games; Reputation (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6V8P ... a22d344ed45ed4043f2b
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:indorg:v:27:y:2009:i:2:p:206-213

Access Statistics for this article

International Journal of Industrial Organization is edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Series data maintained by Heidi Boesdal ().