Optimal Brand Umbrella Size

In a framework or repeated-purchase experience goods with seller’s moral hazard and imperfect monitoring, umbrella branding may improve the terms of the implicit contract between seller and buyers, whereby the seller invests in quality and buyers pay a high price. The benefits from umbrella branding may come from one of two sources: in some cases, umbrella branding leads to a softer punishment of product failure, which increases the seller’s value. In other cases, umbrella branding leads to a harsher punishment of product failure, which allows for an equilibrium where buyers trust in the seller’s brand. Against these benefits, one must consider the costs of umbrella branding, namely that, in some cases, a bad signal in one product kills two streams of revenue and profit. Combining costs and benefits, I determine the set of parameter values where umbrella branding is an optimal strategy

Multiproduct Oligopoly and Bertrand Supertraps

We study oligopoly price competition between multiproduct firms, firms whose products interact in the pro¯t function. Specifically, we focus on the impact of intra firm product interactions on the level of equilibrium prices and pro¯ts. This impact is divided into two effects: a direct effect and a strategic effect (i.e., through the competitors' actions). We derive conditions such that, if intra-firm product interactions cause prices to decrease (increase) while holding competitors' prices fixed, then the strategic effect hurts (benefits) the ¯rm. We also show that, under reasonable general assumptions, the strategic effect more than outweighs the direct effect, so that equilibrium pro¯ts vary in the direction opposite of the direct effect (Bertrand supertrap). Several instances of Bertrand supertraps are developed. For example, stronger demand complementarity or economies of scope lead to tougher price competition to an extent that may decrease profitability (even when the direct profit effect is positive). We present a number of applications of the general results, including learning curves, network effects, systems competition, bundling, switching costs, and internet cross-referencing

Multiproduct Oligopoly and Bertrand Supertraps

We study oligopoly price competition between multiproduct firms, firms whose products interact in the pro¯t function. Specifically, we focus on the impact of intra firm product interactions on the level of equilibrium prices and pro¯ts. This impact is divided into two effects: a direct effect and a strategic effect (i.e., through the competitors' actions). We derive conditions such that, if intra-firm product interactions cause prices to decrease (increase) while holding competitors' prices fixed, then the strategic effect hurts (benefits) the ¯rm. We also show that, under reasonable general assumptions, the strategic effect more than outweighs the direct effect, so that equilibrium pro¯ts vary in the direction opposite of the direct effect (Bertrand supertrap). Several instances of Bertrand supertraps are developed. For example, stronger demand complementarity or economies of scope lead to tougher price competition to an extent that may decrease profitability (even when the direct profit effect is positive). We present a number of applications of the general results, including learning curves, network effects, systems competition, bundling, switching costs, and internet cross-referencing

Optimal Brand Umbrella Size

In a framework or repeated-purchase experience goods with seller’s moral hazard and imperfect monitoring, umbrella branding may improve the terms of the implicit contract between seller and buyers, whereby the seller invests in quality and buyers pay a high price. The benefits from umbrella branding may come from one of two sources: in some cases, umbrella branding leads to a softer punishment of product failure, which increases the seller’s value. In other cases, umbrella branding leads to a harsher punishment of product failure, which allows for an equilibrium where buyers trust in the seller’s brand. Against these benefits, one must consider the costs of umbrella branding, namely that, in some cases, a bad signal in one product kills two streams of revenue and profit. Combining costs and benefits, I determine the set of parameter values where umbrella branding is an optimal strategy

Stretching Firm and Brand Reputation

I consider an adverse selection model of ¯rm reputation. Each firm is characterized by an exogenously given quality level, which is the firm's private information and applies to any product it sells. Consumers observe the performance of the firm's products, which is positively related to the firm's quality level. The firm's reputation is given by the consumers' posterior on the firm's quality level given the firm's performance history. I address the following question: if a firm is to launch a new product, should it use the same name as its base product (reputation stretching), or should it create a new name (and start a new reputation history)? I show that, for a given level of reputation, firms stretch if and only if quality is sufficiently high. As a consequence, stretching signals high quality. If the new product is relatively profitable compared to the base product, then, for a given level of quality, firms stretch if and only if reputation is high (i.e., firms exploit good reputations). Conversely, if the new product is relatively unprofitable compared to the base product, then, for a given level of quality, firms stretch if and only if reputation is low (i.e., firms protect good reputations)

The learning curve, market dominance and pedatory pricing

Centro de Informacion y Documentacion Cientifica (CINDOC). C/Joaquin Costa, 22. 28002 Madrid. SPAIN / CINDOC - Centro de Informaciòn y Documentaciòn CientìficaSIGLEESSpai

An equilibrium approach to international merger policy

Includes bibliographical references. Also available via the InternetAvailable from British Library Document Supply Centre- DSC:3597. 9512(no 3878) / BLDSC - British Library Document Supply CentreSIGLEGBUnited Kingdo