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On Reputational Rents as an Incentive Mechanism in Competitive Markets

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Author Info
Bernardita Vial () (Instituto de Economía. Pontificia Universidad Católica de Chile.)
Felipe Zurita. ()

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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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Publisher Info
Paper provided by Instituto de Economía. 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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Related research
Keywords: Reputation; rents; competition; adverse selection; experience good; public monitoring.;

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Find related papers by JEL classification:
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition

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  1. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-62, August. [Downloadable!] (restricted)
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This page was last updated on 2009-11-12.

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