The impact of brand equity on profit premium in an equilibrium framework

Recent research extends the estimation and analysis of structural demand and supply models to consider the concepts of brand equity and brand value and their role in product investment decisions. In this paper, we analyze data from the Dutch market for new cars to show that differences in brand equi...

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Bibliographic Details
Published inMarketing letters Vol. 35; no. 3; pp. 423 - 438
Main Authors Sándor, Zsolt, Szőcs, Attila, Wildenbeest, Matthijs R.
Format Journal Article
LanguageEnglish
Published New York Springer US 01.09.2024
Springer Nature B.V
Subjects
Brand equity
Business and Management
Costs
Equilibrium
Equity
Investment decision
Investments
Marginal costs
Marketing
Profits
Supply & demand
Brand value
Car market
Empirical IO methods
Brand equity
Random coefficient logit
Nash-Bertrand
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Summary:Recent research extends the estimation and analysis of structural demand and supply models to consider the concepts of brand equity and brand value and their role in product investment decisions. In this paper, we analyze data from the Dutch market for new cars to show that differences in brand equity may also entail significant differences in marginal costs. Next, we illustrate that ignoring the role of brand equity in marginal costs, as the existing literature has, ignores the possibility that investments in brand equity may actually reduce the marginal profits for the offering. This can change investment incentives and produce different market structures.
ISSN:0923-0645
1573-059X
DOI:10.1007/s11002-024-09727-5