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Brand Extension as Informational Leverage

Jay Pil Choi

Title:
Brand Extension as Informational Leverage
Author(s):
Choi, Jay Pil
Date:
Type:
Working papers
Department:
Economics
Permanent URL:
Series:
Department of Economics Discussion Papers
Part Number:
9697-26
Publisher:
Department of Economics, Columbia University
Publisher Location:
New York
Abstract:
The marketing literature refers to the concept of brand capital and provides empirical evidence that firms with a large stock of well established brands have an advantage in introducing new products. This paper develops a theory of brand extension as a mechanism for informational leverage in which a firm leverages off a good's reputation in one market to alleviate the problem of informational asymmetry encountered in other markets. It is shown that brand extension help a multi product monopolist introduce new experience good with less price distortion. Thus, the paper provides a theoretical foundation for the concept of brand capital.
Subject(s):
Marketing
Economic theory
Item views:
312
Metadata:
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