Reputation Effects: Robustness and Fragility

Allen Vong

Papers from arXiv.org

Abstract: Reputation building depends on how evidence is parsed. I revisit the canonical reputation framework in which a long-lived player, either strategic or committed to a fixed action distribution, faces a sequence of short-lived players. I ask whether reputation effects are robust to short-lived players' slight misspecification of the signal process under commitment. I show that the relevant robustness test is not finite-sample correctness, but entropy-rate control of likelihoods along arbitrarily long reputation-building histories. If a misspecification satisfies this control, reputation effects survive. If it fails, they can collapse even when the misspecification is invisible on every fixed finite horizon.

Date: 2026-05, Revised 2026-07
New Economics Papers: this item is included in nep-gth and nep-mic
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