New, Like New, or Very Good? Reputation and Credibility
Bruno Jullien () and
No 09-086, TSE Working Papers from Toulouse School of Economics (TSE)
We show that sellers may earn reputation for their \ability" to deliver high quality goods on average by honestly announcing the realised quality of items for sale every period. As the expected revenue stream from continuing with honest communication increases with their ability, high ability sellers remain honest while low ability sellers find it too costly and sometimes lie about quality for short-term gain. Thus, cheap-talk communication facilitates the market's learning of a seller's ability and strengthens reputation effects. We study this new reputation mechanism and the induced market dynamics, first when sellers cannot restart with a new identity and then when they can. We extend the analysis to various other situations such as voluntary refund and moral hazard.
JEL-codes: C73 D82 D83 L14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-soc
Date: 2009-07, Revised 2014-01-29
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Journal Article: New, Like New, or Very Good? Reputation and Credibility (2014)
Working Paper: New, Like New, or Very Good? Reputation and Credibility (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:21955
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