I thank Heski Bar-Issac, Michael Waldman, two referees and the Editor for helpful comments.
Who Posts the Reputational Bond? Advertising and Cobranding in Vertical Relationships†
Version of Record online: 24 MAR 2013
© 2013 Blackwell Publishing Ltd and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 61, Issue 1, pages 28–61, March 2013
How to Cite
Johnson, J. P. (2013), Who Posts the Reputational Bond? Advertising and Cobranding in Vertical Relationships. The Journal of Industrial Economics, 61: 28–61. doi: 10.1111/joie.12007
- Issue online: 24 MAR 2013
- Version of Record online: 24 MAR 2013
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.