Contracting for brand collaboration projects

Abstract

In this work, we study at how to sign a contract for licensing a brand when two firms cooperate on brand collaboration. Collaboration between two different firms is on the upswing, and it can lead to competitive advantage in terms of differentiating existing products or capturing additional customer groups as a marketing strategy. The outcome of the project and the profits of each firm change based on the type of contract offered by a manufacturer to a partner firm who lends a brand. As a result, since it is essential to choose a contract that maximizes profits, it is suggested which contract to sign based on the features of the two firms. In addition, when partner firm considers spillover effects other than royalty payments when lending brands, this study focus at how the results of contracts and projects change.