The Fragility of Reputation Effects

Allen Vong

Papers from arXiv.org

Abstract: I revisit the canonical reputation framework where a long-lived player -- either a normal type who acts strategically or a commitment type who plays a fixed distribution over actions -- faces a sequence of short-lived players who may misspecify the signal distribution generated by the commitment type. I show that arbitrarily small misspecification can fully eliminate reputation effects. If the short-lived players' subjective commitment-type signal distribution is separated, however slightly, from the convex hull of signal distributions attainable under the true signal structure, a patient normal-type long-lived player's equilibrium payoff is bounded above by his highest equilibrium payoff under complete information. Otherwise, reputation effects survive, possibly in a misspecified form.

Date: 2026-05, Revised 2026-06
New Economics Papers: this item is included in nep-gth and nep-mic
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