AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 73 – Economics

 

Collective Reputation Effects: An Empirical Appraisal

Olivier Gergaud and Florine Livat    

Abstract

This paper is an attempt to shed some empirical light on image linkages that exist between a collective umbrella brand and its related individual components. To tackle this issue, we estimate an interaction model in which a single collective reputation both determines and is determined by a series of individual reputations à la Tirole (1996).

From an application to Bordeaux wines using detailed survey data collected in seven European countries, we get positive and significant spillover effects from the umbrella reputation (Bordeaux) which are found to increase with the individual reputation level of the wine. Controlling for the natural endogeneity of collective reputation in this setup, allows to capture the important fact that this relationship is faced with marginal diminishing returns. In other words that the marginal impact of Bordeaux as an umbrella brand actually tends to decrease to zero (and not to increase in a linear way) as the reputation level of its entities goes up. These spillover effects, when significantly positive, vary from a minimum of 5% to a maximum of 15% of addi- tional favorable quality opinions.

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