Brand Building to Deter Entry and Its Impact on Brand Value

Ron N. Bar () and Avery Haviv ()
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Ron N. Bar: Formerly Ron N. Borkovsky, unaffiliated for research purposes
Avery Haviv: Simon Business School, University of Rochester, Rochester, New York 14627

Management Science, 2023, vol. 69, issue 9, 5418-5438

Abstract: Brand valuation methods traditionally focus on the value a brand generates via its ability to enhance demand and, accordingly, profitability. However, this paper explores how a brand can generate value for a firm through the ability to deter entry of new competitors. In this respect, we distinguish between a brand’s direct effect on demand and its strategic effect on the behavior of rival firms. We investigate this within the context of the U.S. stacked chips category using a dynamic model that endogenizes brand building and entry decisions. We find that up to 63% of a brand’s value can be derived from its ability to deter entry. Furthermore, we find that a brand is most valuable when the cost of entry that potential entrants face is moderate: neither too high nor too low.

Keywords: brand equity; brand value; entry deterrence; empirical IO; dynamic games (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5418-5438

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