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The Dissipation of Profits by Brand Name Investment and Entry when Price Guarantees Quality

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  • Rogerson, William P

Abstract

Two previous models of the dissipation of profits generated by the use of quality-guaranteeing prices assumed that pro fits were dissipated through investment in brand-name capital and ent ry. The model of this paper allows both possibilities. It is shown th at both types of dissipation will, in general, occur and that brand-n ame investment will dissipate a greater share of profits as the elast icity of consumer response to brand-name investment grows larger. Copyright 1987 by University of Chicago Press.

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  • Rogerson, William P, 1987. "The Dissipation of Profits by Brand Name Investment and Entry when Price Guarantees Quality," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 797-809, August.
    • Handle: RePEc:ucp:jpolec:v:95:y:1987:i:4:p:797-809
    DOI: 10.1086/261486
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    Cited by:

    1. Rasmusen, Eric, 2017. "A model of trust in quality and North–South trade," Research in Economics, Elsevier, vol. 71(1), pages 159-170.
    2. Caves, Richard E. & Greene, David P., 1996. "Brands' quality levels, prices, and advertising outlays: empirical evidence on signals and information costs," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 29-52.
    3. Ricardo Sellers†Rubio & Francisco Mas†Ruiz & Franco Sancho†Esper, 2018. "Firm reputation, advertising investment, and price premium: The role of collective brand membership in high†quality wines," Agribusiness, John Wiley & Sons, Ltd., vol. 34(2), pages 351-362, March.
    4. Dana, James D, Jr, 2001. "Competition in Price and Availability When Availability is Unobservable," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 497-513, Autumn.
    5. Landon, Stuart & Smith, Constance, 1997. "The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine," MPRA Paper 9283, University Library of Munich, Germany.
    6. Haucap, Justus & Wey, Christian & Barmbold, Jens, 2000. "Location costs, product quality and implicit franchise contracts," Journal of International Economics, Elsevier, vol. 52(1), pages 69-87, October.
    7. Laurent Linnemer & Anne Perrot, 2000. "Une analyse économique des "signes de qualité". Labels et certification des produits," Revue Économique, Programme National Persée, vol. 51(6), pages 1397-1418.
    8. D Vandegrift, 2001. "Quality‐Assuring Price And Breach Of Express Or Implied Warranty," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 186-196, April.
    9. Chih-Chien Chen & Jane E. Ruseski & Zvi Schwartz, 2009. "Room Rates as Signals of Quality, Sell-Out Risk and the Prospects of Getting a Better Deal: Analytical Model and Empirical Evidence," Tourism Economics, , vol. 15(2), pages 367-380, June.
    10. Coestier, Bénédicte, 1995. "Asymétrie d'information, réputation et signes de qualités," CEPREMAP Working Papers (Couverture Orange) 9505, CEPREMAP.

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