Reputation Cycles

Julien Prat and Boyan Jovanovic ()

No 971, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: This paper shows that two-period cycles may arise endogenously when products are experience goods. Then firms invest in the quality of their output in order to establish a good reputation. Multiple equilibria arise because investment in reputation has a pecuniary external effect that works through the aggregate discount factor. Cycles are more likely to occur when information diffuses slowly and when agents are patient.

Date: 2015
New Economics Papers: this item is included in nep-dge and nep-mic
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Related works:
Working Paper: Reputation Cycles (2016)
Working Paper: Reputation Cycles (2016)
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