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Who Posts the Reputational Bond? Advertising and Cobranding in Vertical Relationships
Author(s) -
Johnson Justin P.
Publication year - 2013
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12007
Subject(s) - economic rent , business , identity (music) , advertising , downstream (manufacturing) , upstream (networking) , quality (philosophy) , moral hazard , bond , welfare , supply chain , marketing , economics , microeconomics , market economy , incentive , finance , engineering , philosophy , physics , epistemology , acoustics , telecommunications
I identify and explore the relationship between two views of brands and advertising, one emphasizing their role in assuring quality and the other emphasizing their role in shifting rents across firms in the supply chain. I show that in the presence of moral hazard, the identity of the reputational bondposter matters, and that both the upstream and the downstream prefer to be the bondposter. I determine the welfare costs of bondposter identity, and who would pay more (or be willing to advertise more) to become the bondposter.