Brand Value and New Product Quality - Measurement, Theory, and Evidence

The dissertation contains two papers that study the interactions between brand value and new product quality. The first paper develops a method to evaluate the effects of blockbuster products on a firm's brand value, and applies this method to evaluate the effects of the introduction of the Razr on Motorola's brand value, i.e., the Razr's halo, cannibalization, and premium effects in the Italian mobile phone market. It finds that the Razr series products contributed about 70% of Motorola's brand value in Italy during the study period, and Razr's premium and halo effects dominate its cannibalization effect. The second paper examines how brand values affect new product quality decisions. It proposes a theory that reconciles different predictions of Ofek and Sarvary (2003) and Randall, Ulrich, and Reibstein (1998) by characterizing the mixed strategy Nash equilibrium for a static game. Four drivers for firms' optimal product quality strategies with respect to brand value are identified. Simulations of dynamic games confirm the theoretic results of the static game although firms that take their future into account tend to soften their strategies in the dynamic game. This paper develops a theoretic model and empirically tests the proposed theory using data from the mobile phone industry in the Italian market. The empirical results provide strong support for the theoretic model. The generated insights indicate that either the prediction of Ofek and Sarvary (2003) or Randall et al. (1998) is correct in its own research context.PhDBusiness AdministrationUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/91375/1/bohuang_1.pd