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When is Reputation Bad

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  • Jeffrey Ely
  • Drew Fudenberg
  • David K Levine

Abstract

In traditional reputation theory, reputation is good for the long-run player. In "Bad Reputation," Ely and Valimaki give an example in which reputation is unambiguously bad. This paper characterizes a more general class of games in which that insight holds, and presents some examples to illustrate when the bad reputation effect does and does not play a role. The key properties are that participation is optional for the short-run players, and that every action of the long-run player that makes the short-run players want to participate has a chance of being interpreted as a signal that the long-run player is "bad. We also broaden the set of commitment types, allowing many types, including the "Stackelberg type" used to prove positive results on reputation. Although reputation need not be bad if the probability of the Stackelberg type is too high, the relative probability of the Stackelberg type can be high when all commitment types are unlikely.

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Bibliographic Info

Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 618897000000000016.

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Date of creation: 08 Apr 2005
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Handle: RePEc:cla:levarc:618897000000000016

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Web page: http://www.dklevine.com/

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References

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  1. Paul Milgrom & John Roberts, 1980. "Predation, Reputation, and Entry Deterrence," Discussion Papers 427, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Mailath, George J & Samuelson, Larry, 2001. "Who Wants a Good Reputation?," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 415-41, April.
  3. Maskin, Eric & Kreps, David & Fudenberg, Drew, 1990. "Repeated Games with Long-run and Short-run Players," Scholarly Articles 3226950, Harvard University Department of Economics.
  4. Drew Fudenberg & David K. Levine, 1995. "Reputation and Equilibrium Selection in Games with a Patient Player," Levine's Working Paper Archive 103, David K. Levine.
  5. Marco Celentani, 1993. "Maintaining a Reputation Against A Long-Lived Opponent," Discussion Papers 1075R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Stephen Morris, 1999. "Political Correctness," Cowles Foundation Discussion Papers 1242, Cowles Foundation for Research in Economics, Yale University.
  7. Fudenberg, D., 1991. "Maintaining a Reputation when Strategies are Imperfectly Observed," Working papers 589, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
  9. George J. Mailath & Larry Samuelson, . ""Your Reputation Is Who You're Not, Not Who You'd Like To Be''," CARESS Working Papres 98-11, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  10. Marco Celentani & Drew Fudenberg & David K Levine & Wolfgang Pesendorfer, 2006. "Maintaining A Reputation Against A Patient Opponent," Levine's Working Paper Archive 699152000000000019, David K. Levine.
  11. Levine, David & Fudenberg, Drew, 1994. "Efficiency and Observability with Long-Run and Short-Run Players," Scholarly Articles 3203774, Harvard University Department of Economics.
  12. Jeffrey C. Ely & Juuso Välimäki, 2003. "Bad Reputation," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 785-814, August.
  13. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  14. Mailath, George J & Samuelson, Larry, 2001. "Who Wants a Good Reputation? Erratum," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 714, July.
  15. Sorin, Sylvain, 1999. "Merging, Reputation, and Repeated Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 274-308, October.
  16. Fudenberg, Drew & Kreps, David M, 1987. "Reputation in the Simultaneous Play of Multiple Opponents," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 541-68, October.
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