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Reputation with Analogical Reasoning

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  • Philippe Jehiel
  • Larry Samuelson

Abstract

We consider a repeated interaction between a long-run player and a sequence of short-run players, in which the long-run player may either be rational or may be a mechanical type who plays the same (possibly mixed) action in every stage game. We depart from the classical model in assuming that the short-run players make inferences by analogical reasoning, meaning that they correctly identify the average strategy of each type of long-run player, but do not recognize how this play varies across histories. Concentrating on 2 � 2 games, we provide a characterization of equilibrium payoffs, establishing a payoff bound for the rational long-run player that can be strictly larger than the familiar "Stackelberg" bound. We also provide a characterization of equilibrium behavior, showing that play begins with either a reputation-building or a reputation-spending stage (depending on parameters), followed by a reputation-manipulation stage. Copyright 2012, Oxford University Press.

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Bibliographic Info

Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 786969000000000304.

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Date of creation: 25 Oct 2011
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Handle: RePEc:cla:levarc:786969000000000304

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References

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  1. George J. Mailath & Larry Samuelson, . "Who Wants a Good Reputation?," Penn CARESS Working Papers a3e3219aee004bd237f8112f9, Penn Economics Department.
  2. Jehiel, Philippe & Ettinger, David, 2010. "A theory of deception," Economics Papers from University Paris Dauphine 123456789/5434, Paris Dauphine University.
  3. Martin W. Cripps & Larry Samuelson, 2004. "Disappearing Private Reputations in Long-Run Relationships," PIER Working Paper Archive 04-031, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Jul 2004.
  4. Mailath, George J & Samuelson, Larry, 2001. "Who Wants a Good Reputation? Erratum," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 714, July.
  5. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
  6. D. Fudenberg & David K. Levine, 1989. "Reputation and Equilibrium Selection in Games with a Patient Player," Levine's Working Paper Archive 508, David K. Levine.
  7. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
  8. Martin W. Cripps & George J. Mailath & Larry Samuelson, 2004. "Imperfect Monitoring and Impermanent Reputations," Econometrica, Econometric Society, vol. 72(2), pages 407-432, 03.
  9. Liu, Qingmin & Skrzypacz, Andrzej, 2009. "Limited Records and Reputation," Research Papers 2030, Stanford University, Graduate School of Business.
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