Identifying the collective reputation premium: a spatial discontinuity approach

Stefano Castriota, Paolo Frumento and Francesco Suppressa

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: In competitive markets, reputation building is considered an important tool to reduce price competition and increase profits. However, from an empirical point of view, identifying the contribution of collective reputation on price net of other confounding variables such as quality, firm reputation and horizontal differentiation, is not trivial. In this work, using an extensive database on Italian geolocalized wineries, we exploit spatial discontinuity at the borders of the wine appellation areas in Piedmont and Tuscany to investigate the impact of collective reputation on price. Results show that collective reputation carries an important price premium for well-known appellations, while the effect is not significant or even negative for weaker ones. This suggests that an excessive proliferation of collective brands might not be useful and could even turn out being harmful as it can confuse buyers.

Keywords: Reputation; collective reputation; asymmetric information; quality standards; institutional signals; wine (search for similar items in EconPapers)
JEL-codes: L14 L15 (search for similar items in EconPapers)
Date: 2024-07-01
New Economics Papers: this item is included in nep-com and nep-ure
Note: ISSN 2039-1854
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2024/310

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