Collective Brands

Résumé

We analyze the effect of a shared brand name, such as geographical names, on incentives of otherwise autonomous firms to establish a reputation for product quality. On the one hand, brand membership provides consumers with more information about past quality and therefore can motivate investment when the scale of production is too small to motivate stand alone firms to invest. On the other hand, a shared brand name may motivate free riding on the group’s reputation, reducing incentives to invest. We identify conditions under which collective branding may deliver higher quality than stand alone firms can achieve.