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Firm reputation with hidden information

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  • Steven Tadelis

Abstract

An adverse selection model of firm reputation is developed in which short-lived clients purchase services from firms operated by overlapping generations of agents. A firm's only asset is its name, or reputation, and trade of names is not observed by clients. As a result, names are traded in all equilibria regardless of the economy's horizon The general equilibrium analysis links the value of a name to the market for services. This causes a non-monotonicity that precludes higher types from sorting themselves through the market for names, and leads to “sensible” dynamics: reputations, and name prices, increase after success and decrease after failure. Copyright Springer-Verlag Berlin Heidelberg 2003

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File URL: http://hdl.handle.net/10.1007/s00199-002-0257-z
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 21 (2003)
Issue (Month): 2 (03)
Pages: 635-651

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Handle: RePEc:spr:joecth:v:21:y:2003:i:2:p:635-651

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Related research

Keywords: JEL Classification Numbers: D80; L14.; Keywords and Phrases: Reputation as an asset; Trade of names; Overlapping generations.;

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Cited by:
  1. Steve Tadelis, 1997. "What's in a Name? Reputation as a Tradeable Asset," Working Papers 97033, Stanford University, Department of Economics.
  2. Christopher Chambers & Paul Healy, 2012. "Updating toward the signal," Economic Theory, Springer, vol. 50(3), pages 765-786, August.
  3. Joyee Deb, 2008. "Observability and Sorting in a Market for Names," Working Papers 08-25, New York University, Leonard N. Stern School of Business, Department of Economics.
  4. Olivier Gergaud & Florine Livat, 2004. "Team versus individual reputations : a model of interaction and some empirical evidence," Cahiers de la Maison des Sciences Economiques bla04015, Université Panthéon-Sorbonne (Paris 1).
  5. Tianxi Wang, 2007. "The Reputation of an Organization and its Dynamics," Economics Discussion Papers 637, University of Essex, Department of Economics.
  6. Thomas Wiseman, 2006. "Reputation and Impermanent Types," 2006 Meeting Papers 650, Society for Economic Dynamics.
  7. Prat, Nicolas & Madnick, Stuart E., 2008. "Measuring Data Believability: A Provenance Approach," Working papers 40086, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Hendrik Hakenes & Martin Peitz, 2004. "Selling Reputation When Going out of Business," CESifo Working Paper Series 1213, CESifo Group Munich.

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