The benefit of collective reputation

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We study a model of reputation with two long-lived firms who operate under a collective brand or as two individual brands. Firms' investments in quality are unobserved and can only be sustained through reputational concerns. In a collective brand, consumers cannot distinguish between the two firms. In the long run, this generates incentives to free-ride on the other firm's investment, but in the short run, it mitigates the temptation to milk a good reputation. The signal structure and consumers' prior beliefs determine which effect dominates. We interpret our findings in light of the type of industry in which the firms operate.
Publisher
WILEY
Issue Date
2019-09
Language
English
Article Type
Article
Citation

RAND JOURNAL OF ECONOMICS, v.50, no.4, pp.787 - 821

ISSN
0741-6261
DOI
10.1111/1756-2171.12296
URI
http://hdl.handle.net/10203/285575
Appears in Collection
MT-Journal Papers(저널논문)
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