Reputation for Toughness

Stefano Barbieri and Marco Serena

Working Papers from Max Planck Institute for Tax Law and Public Finance

Abstract: We study reputation for toughness in finitely repeated contests. Players are rational (payoff-maximizing), or "tough" (always exerting an exogenous high "tough effort"). In the unique symmetric equilibrium, a rational player has strictly positive payoff only if she is monopolizing reputation. In a reputational oligopoly, a fierce war of attrition to become the reputational monopolist may yield overdissipation. In a reputational monopolist, overdissipation never happens and the monopolist mixes between a non-tough effort to cash in on her reputation today and the tough effort to boost her reputation. In our main application, criminal groups build reputation for toughness in illegal markets.

JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Pages: 42
Date: 2021-09
New Economics Papers: this item is included in nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:mpi:wpaper:tax-mpg-rps-2021-16

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