DP15732 Collective Brand Reputation

Author(s): Volker Nocke, Roland Strausz
Publication Date: January 2021
Keyword(s): Collective branding, free riding, Imperfect Monitoring, repeated games, reputation
JEL(s):
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15732

We develop a theory of collective brand reputation for markets in which product quality is jointly determined by local and global players. In a repeated game of imperfect public monitoring, we model collective branding as a pooling of quality signals generated in different markets. Such pooling yields a beneficial informativeness effect for the actions of a global player present in all markets, but also harmful free-riding by local, market-specific players. The resulting tradeoff yields a theory of optimal brand size and revenue sharing, applying to platform markets, franchising, licensing, umbrella branding, and firms with team production.