Reputation and Turnover

Rafael Rob () and Tadashi Sekiguchi
Additional contact information
Rafael Rob: Department of Economics, University of Pennsylvania
Authors registered in the RePEc Author Service: Rafael Robb

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We consider a repeated duopoly game where each firm privately chooses its investment in quality, and realized quality is a noisy indicator of the firm’s investment. We focus on dynamic reputation equilibria, whereby consumers ‘discipline’ a firm by switching to its rival in the case that the realized quality of its product is too low. This type of equilibrium is characterized by consumers’ tolerance level - the level of product quality below which consumers switch to the rival firm - and firms’ investment in quality. Given consumers’ tolerance level, we determine when a dynamic equilibrium that gives higher welfare than the static equilibrium exists. We also derive comparative statics properties, and characterize a set of investment levels and, hence, layoffs that our equilibria sustain.

Keywords: Reputation; consumer switching; moral hazard; repeated games (search for similar items in EconPapers)
JEL-codes: C73 D82 L14 L15 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2004-04-04
New Economics Papers: this item is included in nep-cfn and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://economics.sas.upenn.edu/sites/default/file ... ng-papers/04-032.pdf (application/pdf)

Related works:
Journal Article: Reputation and turnover (2006)
Working Paper: Reputation and Turnover (2004)
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:pen:papers:04-032

Access Statistics for this paper

More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator ().