Self-image and the Emergence of Brand Loyalty in Networked Markets

Brand loyalty consists of a consumer's commitment to repurchase or otherwise continue using a given brand and is demonstrated by repeated buying of a product or service, or other positive behaviors such as word of mouth advocacy. Standard models of the emergence of brand loyalty consider the behavior of autonomous individuals who are essentially reacting to the objective attributes of the brand. Here, we show that brand loyalty can be regarded as a social construct, which emerges when the fundamental psychological principle of self-image is combined with agents reacting to each others’ decisions in social network markets. Brand loyalty can emerge even when agents find it hard to distinguish between brands in terms of their objective attributes. We illustrate the principles in the context of the wellknown model of binary choice with externalities. We endogenise the behavior of agents using the principle of self-image, and illustrate the consequences in situations where consumers face not a one-off choice of adopting or not adopting, but a chain of mutually dependent decisions about complex products over a period of time.