Selling when Brand Image Matters

Stefan Buehler and Daniel Halbheer

Journal of Institutional and Theoretical Economics (JITE), 2011, vol. 167, issue 1, 102-118

Abstract: This paper studies profit-maximizing seller behavior when brand image affects demand. We consider a seller facing a population of consumers with heterogeneous tastes regarding product quality and brand image. First, we analyze active branding by the seller through costly advertising. Our analysis shows that advertising, price, and profits are all increasing in the average valuation of brand image in the population. Second, we examine the role of passive branding emanating from the population's consumption of the product. We find that seller profits increase in the average degree of conformity in the population, whereas the price remains unaffected.

JEL-codes: D42 L15 L21 M37 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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