The fragility of reputation effects

Allen Vong

Papers from arXiv.org

Abstract: I revisit the canonical reputation framework in which a long-lived player interacts with a sequence of short-lived opponents and may be either strategic or a commitment type who always plays the same, possibly mixed, action. I depart by allowing short-lived players to be uncertain not only about the long-lived player's type, but also about the signal structure. I show that even vanishingly small misspecified skepticism of short-lived players about commitment as an explanation of the observed signals can completely eliminate reputation effects: a patient strategic long-lived player's equilibrium payoff is bounded above by the canonical complete-information benchmark.

Date: 2026-05
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