Reputation Effects with Endogenous Records

Harry Pei

Papers from arXiv.org

Abstract: A patient firm interacts with a sequence of consumers. The firm is either an honest type who supplies high quality and never erases its records, or an opportunistic type who chooses what quality to supply and may erase its records at a low cost. We show that in every equilibrium, the firm has an incentive to build a reputation for supplying high quality until its continuation value exceeds its commitment payoff, but its ex ante payoff must be close to its minmax value when it has a sufficiently long lifespan. Therefore, even a small fraction of opportunistic types can wipe out the firm's returns from building reputations. Even if the honest type can commit to reveal information about its history according to any disclosure policy, the opportunistic type's payoff cannot exceed its equilibrium payoff when the consumers receive no information.

Date: 2023-08, Revised 2023-08
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2308.13956 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2308.13956

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().