Reputation and Efficiency: Information Design

Allen Vong

American Economic Journal: Microeconomics, 2025, vol. 17, issue 3, 191-243

Abstract: A firm trades with a sequence of consumers who are unsure about the firm's competence and its effort to supply quality. I examine rating systems that sustain efficient outcomes in virtually all trades by providing consumers with information to motivate a patient-competent firm's effort. I characterize necessary and sufficient conditions for these systems to exist. I show that any such system censors the firm's track records, and explicitly construct one such system. This system reveals that the firm has produced consecutively many good outputs whenever this happens and hides all information otherwise.

JEL-codes: D21 D82 D83 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/mic.20220374

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