How to promote quality perception: Brand advertising or geographical indication?

Chengyan Yue, Stéphan Marette, John C. Beghin

Research output: Chapter in Book/Report/Conference proceedingChapter

1 Scopus citations

Abstract

We investigate producers' choice between geographical indications (GI) and brand advertising (BA) as pure marketing strategies to convey information to consumers. Producers also decide whether or not to select an effort level for improving the quality of their products. We identify conditions under which GI and BA emerge with and without quality effort, depending on the relative costs and effectiveness of marketing strategies and quality improvement. Beyond the conventional equilibrium cases of Gl-no-quality-effort and BA-with-quality-effort, we identify several other equilibrium strategies. Under plausible parameter characterization, and in spite of the free-riding problem of collective reputation, producers choose GI and quality improvement efforts at equilibrium. This occurs when the cost of marketing is high, the relative cost of quality effort is low relative to the former, and when the effectiveness of marketing promotions is low. BA without quality improvement also emerges as an equilibrium strategy for the opposite cost structure (low cost of promotion, high cost of effort relative to promotion, and higher effectiveness of promotion). Finally, the joint selection of both instruments BA and GI is examined. We motivate and illustrate our analysis with the European and New-World wine industries.

Original languageEnglish (US)
Title of host publicationNontariff Measures and International Trade
PublisherWorld Scientific Publishing Co. Pte Ltd
Pages339-364
Number of pages26
ISBN (Electronic)9789813144415
ISBN (Print)9789813144408
DOIs
StatePublished - Nov 28 2016

Bibliographical note

Publisher Copyright:
© 2017 by World Scientific Publishing Co. Pte. Ltd.

Copyright:
Copyright 2019 Elsevier B.V., All rights reserved.

Keywords

  • Brand advertising
  • Effort
  • GI
  • Geographical indication
  • Quality
  • Trade
  • Wine

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