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Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product

Joachim Grosser, Hendrik Sonnabend Orcid Logo, Bastian Westbrock Orcid Logo

The B.E. Journal of Economic Analysis & Policy, Volume: 24, Issue: 2, Pages: 649 - 658

Swansea University Author: Bastian Westbrock Orcid Logo

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DOI (Published version): 10.1515/bejeap-2022-0456

Abstract

This paper contributes to the understanding of how brand scandals related to a brand leader’s product affect the follower firm’s choice between copycatting and independent product development. In a model of vertical product differentiation, we show that it is optimal for the copycatter to follow a ‘...

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Published in: The B.E. Journal of Economic Analysis & Policy
ISSN: 1935-1682
Published: Walter de Gruyter GmbH 2024
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa67535
first_indexed 2024-09-02T15:43:41Z
last_indexed 2024-11-25T14:20:22Z
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spelling 2024-10-28T14:55:58.1813529 v2 67535 2024-09-02 Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product 40408e9de92daaa653357f6b40ed66fd 0000-0002-8303-0808 Bastian Westbrock Bastian Westbrock true false 2024-09-02 SOSS This paper contributes to the understanding of how brand scandals related to a brand leader’s product affect the follower firm’s choice between copycatting and independent product development. In a model of vertical product differentiation, we show that it is optimal for the copycatter to follow a ‘safe distance’ strategy which guarantees a certain degree of protection against the negative spillovers associated with a brand scandal to the leader. Nevertheless, when the follower firm can choose between copycatting and decoupling, it chooses a higher quality for its copycat product because of the lower development costs. The decision for or against copycatting thus depends on a trade-off between development costs and the possibility of negative spillovers. Finally, we show that the threat of a scandal can lead to an additional indirect welfare cost because it diverts the follower’s choice away from a welfare-maximizing copycat strategy. Journal Article The B.E. Journal of Economic Analysis &amp; Policy 24 2 649 658 Walter de Gruyter GmbH 1935-1682 vertical product differentiation; copycatting; brand scandals 15 4 2024 2024-04-15 10.1515/bejeap-2022-0456 Letter COLLEGE NANME Social Sciences School COLLEGE CODE SOSS Swansea University 2024-10-28T14:55:58.1813529 2024-09-02T16:39:29.6172101 Faculty of Humanities and Social Sciences School of Social Sciences - Economics Joachim Grosser 1 Hendrik Sonnabend 0000-0003-0667-8595 2 Bastian Westbrock 0000-0002-8303-0808 3 67535__31239__5702c1fd853943d7a4855337b032c086.pdf 10.1515_bejeap-2022-0456.pdf 2024-09-02T16:42:24.5973598 Output 444647 application/pdf Version of Record true ©2024 the author(s), published by De Gruyter. This work is licensed under the Creative Commons Attribution 4.0 International License. true eng https://creativecommons.org/licenses/by/4.0/
title Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product
spellingShingle Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product
Bastian Westbrock
title_short Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product
title_full Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product
title_fullStr Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product
title_full_unstemmed Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product
title_sort Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product
author_id_str_mv 40408e9de92daaa653357f6b40ed66fd
author_id_fullname_str_mv 40408e9de92daaa653357f6b40ed66fd_***_Bastian Westbrock
author Bastian Westbrock
author2 Joachim Grosser
Hendrik Sonnabend
Bastian Westbrock
format Journal article
container_title The B.E. Journal of Economic Analysis &amp; Policy
container_volume 24
container_issue 2
container_start_page 649
publishDate 2024
institution Swansea University
issn 1935-1682
doi_str_mv 10.1515/bejeap-2022-0456
publisher Walter de Gruyter GmbH
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Social Sciences - Economics{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Social Sciences - Economics
document_store_str 1
active_str 0
description This paper contributes to the understanding of how brand scandals related to a brand leader’s product affect the follower firm’s choice between copycatting and independent product development. In a model of vertical product differentiation, we show that it is optimal for the copycatter to follow a ‘safe distance’ strategy which guarantees a certain degree of protection against the negative spillovers associated with a brand scandal to the leader. Nevertheless, when the follower firm can choose between copycatting and decoupling, it chooses a higher quality for its copycat product because of the lower development costs. The decision for or against copycatting thus depends on a trade-off between development costs and the possibility of negative spillovers. Finally, we show that the threat of a scandal can lead to an additional indirect welfare cost because it diverts the follower’s choice away from a welfare-maximizing copycat strategy.
published_date 2024-04-15T08:28:15Z
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score 11.047544

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