Reputational Externality and Self-Regulation

Robert Evans and Timothy Guinnane

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Professional associations and other producer groups often complain that their reputation is damaged by other groups providing a similar but lower-quality service and that the latter should be regulated. We examine the conditions under which a common regulatory regime can induce Pareto-improvements by creating a common reputation for quality among heterogeneous producers, when the regulator cannot commit to a given quality. A common reputation can be created only if the groups are not too different and if marginal cost is declining. High cost groups and small groups benefit most from forming a common regime.

Keywords: Keywords: Quality Regulation; Licensing; Collective Reputation; Reputational Externality (search for similar items in EconPapers)
JEL-codes: L43 L44 (search for similar items in EconPapers)
Pages: 32
Date: 2006-03
New Economics Papers: this item is included in nep-com and nep-reg
Note: ET, IO
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0628

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