Entry decisions for vertically differentiated markets with brand spillovers

Keita Nire and Nobuo Matsubayashi

European Journal of Operational Research, 2024, vol. 314, issue 2, 565-578

Abstract: When a branded firm offers a new product at a quality level different from that of its existing product(s), some bias is often present as consumers are affected by the quality of the existing product(s) when evaluating the quality of the new one(s). Consequently, this product offering creates a forward spillover effect and, in turn, might even impact consumers’ utility from the existing product, referred to as the reciprocal spillover effect. Given the potential for such brand spillovers, how should a branded firm enter a new market with a vertically differentiated product? We analytically investigate a branded firm’s choice of quality and the profitability of entering a new market.

Keywords: Quality management; Vertical differentiation; Umbrella branding; Behavioral economics; Game theory (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:314:y:2024:i:2:p:565-578

DOI: 10.1016/j.ejor.2023.09.024

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