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On Reputational Rents as an Incentive Mechanism in Competitive Markets

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  • Bernardita Vial

    ()
    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

  • Felipe Zurita.

    ()

Abstract

This paper shows that more intense competition may improve, rather than hamper, the chances that a market for an experience good or service overcomes the problems caused by informational asymmetries. This, in spite of the fact that intensified competition diminishes the reputational rents that -allegedly- provide the incentives for the production of high quality. Our results show that instead, these incentives are created by price differentials not levels.

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Bibliographic Info

Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 354.

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Date of creation: 2009
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Handle: RePEc:ioe:doctra:354

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Keywords: Reputation; rents; competition; adverse selection; experience good; public monitoring;

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  1. Bar-Isaac, Heski & Tadelis, Steven, 2008. "Seller Reputation," Foundations and Trends(R) in Microeconomics, now publishers, vol. 4(4), pages 273-351, August.
  2. Douglas W. Diamond, 1998. "Reputation Acquisition in Debt Markets," Levine's Working Paper Archive 602, David K. Levine.
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