Quality Expectations, Reputation and Price

• Author(s) / Creator(s)

  • Landon, Stuart
  • Smith, Constance E.

• While the theoretical literature on firm reputation is well developed, there exist few empirical studies that quantify the importance of reputation effects. This paper and reputation using data from the market for Bordeaux wine. A model is proposed in which price is a function of current quality and expected quality, where the latter depends on reputation. Equations determining price and expected quality are estimated jointly. The empirical findings show that the price premium associated with a better reputation far exceeds that associated with improvements in current quality. The impact of reputation on price is a disaggregated into individual firm and collective (or group) reputation effects and the significance and magnitude of these effects are compared. The results indicate that both types of reputation are important and that, in general, the market values collective reputation indicators only to the extent that they are useful predictors of product quality.

• Date created

  1998-01-01

• Subjects / Keywords

  • Product Quality
  • Reputation
  • Information

• Type of Item

  Article (Published)

• DOI

  https://doi.org/10.7939/R3GT5FZ09

• License

  Attribution-NonCommercial 4.0 International