The Benefit of Collective Reputation

Zvika Neeman (), Aniko Öry and Jungju Yu ()
Additional contact information
Zvika Neeman: Tel Aviv University, https://www.tau.ac.il
Jungju Yu: Yale School of Management, https://som.yale.edu/

No 2068, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study a model of reputation with two long-lived firms that sell their products under a collective brand or under two different individual brands. Firms face a moral hazard problem because their quality investments are not observed. Investments can only be sustained due to reputational concerns. In a collective brand, consumers cannot distinguish between the two firms. We show that in the long run, this makes it harder to establish a good reputation because of the incentives to free-ride on the other firm�s investments. But in the short run it mitigates the temptation to milk good reputation. Consequently, a collective brand can provide stronger incentives to invest in quality if firms are sufficiently impatient. We explain the connection between incentives and the type of industry in which the firms operate as captured by the underlying signal structure and consumers� prior beliefs. We discuss the relation to country-of-origin labelling, agricultural cooperatives, and other collective brands.

Keywords: Branding; Collective reputation; Commitment; Country of origin (search for similar items in EconPapers)
JEL-codes: C70 D21 D40 D70 L10 L50 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2016-12, Revised 2018-04
New Economics Papers: this item is included in nep-com, nep-gth, nep-hpe, nep-ipr, nep-mic and nep-mkt
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Related works:
Journal Article: The benefit of collective reputation (2019)
Working Paper: The Benefit of Collective Reputation (2016)
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