Umbrella branding and the provision of quality


Hakenes, Hendrik ; Peitz, Martin


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URL: http://ub-madoc.bib.uni-mannheim.de/2692
URN: urn:nbn:de:bsz:180-madoc-26923
Document Type: Working paper
Year of publication: 2004
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: D82 M37 L15 L14 ,
Subject headings (SWD): Gemeinschaftsmarketing , Qualität , Markenartikel , Produktimage , Signaling , Asymmetrische Information , Moral Hazard
Keywords (English): Umbrella branding , reputation transfer , signaling , experience goods
Abstract: Consider a two-product firm that decides on the quality of each product. Product quality is unknown to consumers. If the firm sells both products under the same brand name, consumers adjust their beliefs about quality subject to the performance of both products. We show that if the probability that low quality will be detected is in an intermediate range, the firm produces high quality under umbrella branding whereas it would sell low quality in the absence of umbrella branding. Hence, umbrella branding mitigates the moral hazard problem. We also find that umbrella branding survives in asymmetric markets and that even unprofitable products may be used to stabilize the umbrella brand. However, umbrella branding does not necessarily imply high quality; the firm may choose low-quality products with positive probability.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Hakenes, Hendrik ; Peitz, Martin (2004) Umbrella branding and the provision of quality. Open Access [Working paper]
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