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The Simple Economics of "Brand-Stretching"

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  • Lynne Pepall
  • Dan Richards

Abstract

We analyze brand stretchingthe extension of a successful brand label from an initial home market to a different product lineusing a model that assumes that brand identity is a complementary feature that enhances consumer willingness to pay. Our analysis implies a pattern of brand-stretching entry in which (1) firms with strong brand identities may prefer to extend their brands to markets that are "far" from their original product line, and (2) fragmented or unconcentrated markets with no strong incumbent brands are attractive entry targets for brand extension.
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Suggested Citation

  • Lynne Pepall & Dan Richards, 1999. "The Simple Economics of "Brand-Stretching"," Discussion Papers Series, Department of Economics, Tufts University 9905, Department of Economics, Tufts University.
    • Handle: RePEc:tuf:tuftec:9905
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    References listed on IDEAS

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    1. Margaret S. McMillan, 1999. "Foreign Direct Investment: Leader or Follower?," Discussion Papers Series, Department of Economics, Tufts University 9901, Department of Economics, Tufts University.
    2. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2009. "U.S. Trade and Other Policy Options and Programs to Deter Foreign Exploitation of Child Labor," World Scientific Book Chapters, in: Globalization And International Trade Policies, chapter 18, pages 689-743, World Scientific Publishing Co. Pte. Ltd..
    3. William A. Masters & Margaret S. McMillan, 1999. "Ethnolinguistic Diversity, Government Expenditures and Economic Growth Across Countries," Discussion Papers Series, Department of Economics, Tufts University 9902, Department of Economics, Tufts University.
    4. Lynne M. Pepall, 2002. "The Simple Economics of Brand Stretching," The Journal of Business, University of Chicago Press, vol. 75(3), pages 535-552, July.
    5. Jay Pil Choi, 1998. "Brand Extension as Informational Leverage," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(4), pages 655-669.
    6. William A. Masters & Margaret S. McMillan, 1999. "A Political Economy Model of Agricultural Taxation, R&D, and Growth in Africa," Discussion Papers Series, Department of Economics, Tufts University 9903, Department of Economics, Tufts University.
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