Information value and externalities in reputation building

Gary Bolton (), Axel Ockenfels and Felix Ebeling

International Journal of Industrial Organization, 2011, vol. 29, issue 1, 23-33

Abstract: In sequential equilibrium theory, reputation building is independent of whether the reputation builder is matched with one long-run partner or a series of short-run "strangers". We observe, however, that reputation builders are significantly more challenged by long-run players in both laboratory chain store and buyer-seller games. Reputation builder behavior is more predictable than implied by equilibrium, and so reputation information has more economic value than implied by equilibrium. For short-run players, this reputation information value is an externality. For long-run players, the value of the information is internalized and so they have greater incentive to challenge the reputation builder.

Date: 2011
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:29:y:2011:i:1:p:23-33

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