Reputation in the Shadow of Exit

Daniel Luo

Papers from arXiv.org

Abstract: I study reputation formation in repeated games where player actions endogenously determine the probability the game permanently ends. Permanent exit can render reputation useless even to a patient long-lived player whose actions are perfectly monitored, in stark contrast to canonical commitment payoff theorems. However, I identify tight conditions for the long-run player to attain their Stackelberg payoff in the unique Markovian equilibria. Along the way, I highlight the role of Markovian strategies in pinning down the value of reputation formation. I apply my results to repeated global games with exit, and obtain new predictions about regime survival and a dynamic foundation for risk dominant selection.

Date: 2024-04, Revised 2025-09
New Economics Papers: this item is included in nep-gth and nep-mic
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