Collective Reputation in Trade: Evidence from the Chinese Dairy Industry

The existence of collective reputation implies an important externality. Among firms trading internationally, quality shocks about one firms products could affect the demand of other firms from the same origin country. We study such reputation spillover in the context of a large-scale scandal that affected the Chinese dairy industry in 2008. Leveraging detailed firm-product level administrative data and official quality inspection reports, we document sizable reputation spillovers on uncontaminated firms. We further investigate potential mechanisms that could mediate the strength of collective reputation, including information accuracy, observability of the supply chain and prior export experience.

Reputation and Advertising of Collective Brand Members in the Wine Industry: The Moderating Role of Market Share

This paper analyzes the nonlinear relationship between the advertising investment and reputation of collective brand members in an experience goods industry, as well as the moderating role of their market share within the collective brand. The central assumption is that the quality reputation of collective brand members has a positive effect on their advertising investment until a reputation threshold is reached, after which the effect on advertising investment becomes negative. This change in the slope is explained by the information sets (firm reputation and collective reputation) used by consumers to reduce uncertainty, which leads to a weaker motivation for the firm to invest in advertising. In addition, scale economies of advertising mean that the market share of collective brand members negatively moderates the curvilinear relationship between quality reputation and advertising investment. The results for a sample of 176 companies in a Spanish experience goods industry (i.e., winemaking) between 2004 and 2014 show an inverted U-shaped relationship between the advertising investment and reputation of collective brand members. The results also show that market share negatively moderates this curvilinear relationship. (JEL Classifications: M31, M37, Q13)

Economic Implications of Protecting Regional Reputations

This article develops a theoretical model to analyze how policies such as regional labeling, geographic indications, and quality standards affect welfare when firms have a collective reputation corresponding to a region. The tradeoff is between consumer information and protection of the regional names against the effect of supply restriction, which is often considered to be collusive behavior. Regional labeling is found to increase quality for all firms and increases profits for firms in the high-quality producing region, although the effect on profits for firms in the low-quality producing region is ambiguous. Quality standards may also increase quality and profits in all regions, but can also be used as a way to restrict imports if standards are too high. Quotas can also alleviate the collective information problem and increase profits, but does so at the expense of consumers. We argue that clear labeling and achievable standards are preferable to import quotas due to consumer surplus.

Willingness-to-Pay for Reshuffling Geographical Indications

This article presents a new experimental protocol for estimating consumers’ willingness-to-pay (WTP) for products involved in a reshuffle of geographical indications (GIs), e.g., a change of hierarchical levels within a restricted area. Although the collective reputation of a given GI depends on its temporal stability, reshuffling a GI area could make it better aligned with product quality or consumers’ perception. We first provide a simple theoretical model in which consumers put a negative value on within-GI quality variance, thereby showing that reshuffling the GI designation scheme may increase WTP without any change in product quality. Using the experimental protocol, we evaluate consumer perceptions of different reshuffling scenarios for the vineyards of Marsannay, Burgundy, France. The results reveal a significant increase in WTP for the current distribution of products’ quality. Elicited WTP values are then used to simulate the optimal GI reshuffle. (JEL Classifications: L66, Q18, Q28)