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Quality competition and entry deterrence: When to launch a second brand

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  • Stephan Müller
  • Georg Götz

Abstract

We study the rationale for an incumbent to launch a second brand when facing potential entry into a market with quality‐differentiated products and a fringe producer. Depending on market size, the cost of a second brand and a potential entrant's setup cost the incumbent might use a second brand both when deterring and when accommodating entry. For low costs of brand proliferation, the high‐quality firm will prevent entry with limit qualities or multiple brands. The high‐quality incumbent will accommodate entry only if it cannot be prevented. Accommodation is always accompanied by an additional brand safeguarding the premium brand.

Suggested Citation

  • Stephan Müller & Georg Götz, 2017. "Quality competition and entry deterrence: When to launch a second brand," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(8), pages 1201-1215, December.
    • Handle: RePEc:wly:mgtdec:v:38:y:2017:i:8:p:1201-1215
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    Cited by:

    1. Peter-J. Jost, 2023. "Price commitment and the strategic launch of a fighter brand," Quantitative Marketing and Economics (QME), Springer, vol. 21(3), pages 381-435, September.

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