Endogenous Prices in Markets with Reputational Concerns

Magnus Våge Knutsen

RAND Journal of Economics, 2025, vol. 56, issue 3, 269-284

Abstract: I set up a dynamic experience goods model where a long‐lived seller interacts with a sequence of short‐lived buyers and where the seller has reputational concerns. The key innovation of the article is to endogenize prices in this framework, specifically by endowing either the seller or the buyers with the ability to post price. I show that influence over prices has a strong impact on equilibrium characteristics. If the seller posts price, equilibria will display work‐shirk dynamics. If the buyers post price, however, there is always an equilibrium where the seller builds and perpetually maintains her reputation.

Date: 2025
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