Observable Reputation Trading

Hendrik Hakenes and Martin Peitz

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: Is the reputation of a firm tradable when the change in ownership is observable? We consider a competitive market in which a share of owners must retire in each period. New owners bid for the firms that are for sale. Customers learn the owner’s type, which reflects the quality of the good or service provided, through experience. After observing an ownership change they may want to switch firm. However, in equilibrium, good new owners buy from good old owners and retain high-value customers. Hence reputation is a tradable intangible asset, although ownership change is observable.

Keywords: Reputation; ownership change; intangible assets; theory of the firm. (search for similar items in EconPapers)
JEL-codes: D40 D82 L14 L15 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-bec, nep-fmk and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: OBSERVABLE REPUTATION TRADING (2007)
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