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Reputation in Long-Run Relationships

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  • Alp E. Atakan
  • Mehmet Ekmekci

Abstract

We model a long-run relationship as an infinitely repeated game played by two equally patient agents. In each period, the agents play an extensive-form stage game of perfect information with either locally non-conflicting interests or strictly conflicting interests. There is incomplete information about the type of Player 1, while Player 2's type is commonly known. We show that a sufficiently patient Player 1 can leverage Player 2's uncertainty about his type to secure his highest pay-off, compatible with Player 2's individual rationality, in any perfect Bayesian equilibrium of the repeated game. Copyright 2012, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/restud/rdr037
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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 79 (2012)
Issue (Month): 2 ()
Pages: 451-480

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Handle: RePEc:oup:restud:v:79:y:2012:i:2:p:451-480

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  1. Christopher Phelan, 2001. "Public trust and government betrayal," Staff Report, Federal Reserve Bank of Minneapolis 283, Federal Reserve Bank of Minneapolis.
  2. Martin W. Cripps & George J. Mailath & Larry Samuelson, 2004. "Imperfect Monitoring and Impermanent Reputations," Econometrica, Econometric Society, Econometric Society, vol. 72(2), pages 407-432, 03.
  3. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Oxford University Press, Oxford University Press, vol. 70(2), pages 231-251.
  4. Wiseman, Thomas, 2008. "Reputation and impermanent types," Games and Economic Behavior, Elsevier, Elsevier, vol. 62(1), pages 190-210, January.
  5. Michihiro Kandori & Ichiro Obara, 2003. "Less is More: An Observability Paradox in Repeated Gamess," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-246, CIRJE, Faculty of Economics, University of Tokyo.
  6. Bakos, Yannis & Dellarocas, Chrysanthos, 2003. "Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 4295-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. Liu, Qingmin & Skrzypacz, Andrzej, 2009. "Limited Records and Reputation," Research Papers, Stanford University, Graduate School of Business 2030, Stanford University, Graduate School of Business.
  8. Kandori, Michihiro, 1992. "The Use of Information in Repeated Games with Imperfect Monitoring," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(3), pages 581-93, July.
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Cited by:
  1. Monte, Daniel, 2013. "Bounded memory and permanent reputations," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 49(5), pages 345-354.
  2. Atakan, Alp Enver & Ekmekci, Mehmet, 2014. "Reputation in Repeated Moral Hazard Games," MPRA Paper 54427, University Library of Munich, Germany.
  3. Francoise Forges & Antoine Salomon, 2014. "Bayesian Repeated Games and Reputations," CESifo Working Paper Series, CESifo Group Munich 4700, CESifo Group Munich.

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