The Economics of Collective Brands

We analyze the effect of a shared brand name, such as geographical names, on incentives of otherwise autonomous firms to invest in quality. On the one hand, by improving communication between sellers and consumers, a shared brand label can motivate reputation building when the scale of production is too small for individual firms to establish reputations on a stand alone basis. On the one hand, sharing a brand name may motivate free riding on the group's reputation, reducing investment in quality. We identify conditions under which collective branding delivers higher quality than is achievable by stand alone firms.