Component sharing may look great in the boardroom, but not in the showroom. Indeed, savings
on R&D and production costs could be offset by a plunge in customer brand attractiveness and
willingness to pay. This paper investigates the impact of component sharing on customer
evaluation of luxury, volume and economy brands offered in a car manufacturer’s vertical
product line and its subsequent revenue consequences. The authors consider both the harm to
the higher-end brand and the benefits for the lower end brand, and analyze with a random
effects model how the size of these effects depends on the brand combination, the type of
component, the source of the components sharing, and customer characteristics. An
experimental study shows that the harm for the higher-end brand is largest, when (1) a luxury
brand shares components with a volume brand, (2) the source of the components is the higherend
brand, and when (3) the customer has a high initial evaluation of the higher-end brand. For
the lower-end brand, the positive effect is largest, when (1) a volume brand shares with an
economy brand, (2) the lower-end brand is the source of the components, and (3) customers
have a high initial evaluation of the higher-end brand. Components that have a strong impact on
evaluation are interior, wheels, chassis and the engine. Simulations show that sharing
components typically translates in negative revenue consequences for both analyzed
manufacturers. An interesting exception emerges for the Japanese manufacturer, which obtains
a boost in total revenue when its small luxury brand shares components with its large volume
brand