3 How to Promote Quality Perception: Brand Advertising or Geographical Indication?

Chengyan Yue, Stéphan Marette and John Beghin ()

A chapter in Nontariff Measures with Market Imperfections: Trade and Welfare Implications, 2013, pp 73-98 from Emerald Group Publishing Limited

Abstract: We investigate producers’ choice between geographical indications (GI) and brand advertising (BA) as pure marketing strategies to convey information to consumers. Producers also decide whether or not to select an effort level for improving the quality of their products. We identify conditions under which GI and BA emerge with and without quality effort, depending on the relative costs and effectiveness of marketing strategies and quality improvement. Beyond the conventional equilibrium cases of GI-no-quality-effort and BA-with-quality-effort, we identify several other equilibrium strategies. Under plausible parameter characterization, and in spite of the free-riding problem of collective reputation, producers choose GI and quality improvement efforts at equilibrium. This occurs when the cost of marketing is high, the relative cost of quality effort is low relative to the former, and when the effectiveness of marketing promotions is low. BA without quality improvement also emerges as an equilibrium strategy for the opposite cost structure (low cost of promotion, high cost of effort relative to promotion, and higher effectiveness of promotion). Finally, the joint selection of both instruments BA and GI is examined. We motivate and illustrate our analysis with the European and New-World wine industries.

Keywords: Brand advertising; effort; geographical indication; GI; quality; wine; trade (search for similar items in EconPapers)
Date: 2013
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Chapter: How to Promote Quality Perception: Brand Advertising or Geographical Indication? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:fegzzz:s1574-8715(2013)0000012008

DOI: 10.1108/S1574-8715(2013)0000012008

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