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Only the Ugly Face? A Theoretical Model of Brand Dilution

Author

Listed:
  • Emanuele Bacchiega

    (Dipartimento di Informatica–Scienza e Ingegneria, Alma Mater Studiorum–Università di Bologna, 40126 Bologna, Italy)

  • Mariachiara Colucci

    (Dipartimento di Scienze Aziendali, Alma Mater Studiorum–Università di Bologna, 40126 Bologna, Italy)

  • Vincenzo Denicolò

    (Dipartimento di Scienze Economiche, Alma Mater Studiorum–Università di Bologna, 40126 Bologna, Italy; Centre for Economic Policy Research, London EC1V 0DX, United Kingdom)

  • Marco Magnani

    (Italian Regulatory Authority for Energy, Networks and the Environment, 20121 Milan, Italy)

Abstract

This paper challenges two common views of brand dilution: first, that it is exclusively the unintended consequence of a poorly executed strategy of brand extension and, second, that its likelihood is heightened by brand licensing. Using a new theoretical model, we show that brand dilution can be seen not just as an unfortunate development to be avoided, but as an opportunity to monetize the brand. We further show that, at the relevant margin, switching from in-house development to licensing reduces the risk of brand dilution. The model offers a novel perspective on some important managerial choices and generates a series of empirically testable hypotheses.

Suggested Citation

  • Emanuele Bacchiega & Mariachiara Colucci & Vincenzo Denicolò & Marco Magnani, 2024. "Only the Ugly Face? A Theoretical Model of Brand Dilution," Management Science, INFORMS, vol. 70(5), pages 3182-3199, May.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:5:p:3182-3199
    DOI: 10.1287/mnsc.2022.00852
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