Advanced Search
MyIDEAS: Login to save this article or follow this journal

Walrasian Equilibrium and Reputation under Imperfect Public Monitoring

Contents:

Author Info

  • Vial Bernardita

    ()
    (Pontificia Universidad Católica de Chile)

Abstract

This paper examines a reputation-based mechanism that sustains the provision of high quality in the presence of competition among providers, where the incentive for high-quality production comes from a reputation premium: firms with higher reputations charge higher prices. The way we model the market highlights the fact that prices are not solely determined from consumers' willingness to pay as in the monopolistic setting studied in the previous literature. In effect, equilibrium prices are determined endogenously, from the interaction of the distribution of consumers' valuations for high quality and the distribution of firms' reputations—the demand and the supply sides of the market, respectively. This paper shows that: (i) there is a steady-state distribution of reputations, a result that allows the study of a stationary equilibrium; (ii) there are parameter configurations for which the existence of a high-quality equilibrium is guaranteed, and where the incentives for high quality production in the repeated game depend on the shape of the price function; and (iii) the Walrasian-equilibrium price function depends on the shape of the steady-state distribution of reputations, and the assignment of consumers to firms with different reputation levels in such an equilibrium is positively assortative if quality is a normal good.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.degruyter.com/view/j/bejte.2010.10.1/bejte.2010.10.1.1638/bejte.2010.10.1.1638.xml?format=INT
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 10 (2010)
Issue (Month): 1 (May)
Pages: 1-44

as in new window
Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:23

Contact details of provider:
Web page: http://www.degruyter.com

Order Information:
Web: http://www.degruyter.com/view/j/bejte

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bernardita Vial & Felipe Zurita, 2013. "Reputation-Driven Industry Dynamics," Documentos de Trabajo 436, Instituto de Economia. Pontificia Universidad Católica de Chile..

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:23. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.