Incentives and Reputation when Names can be Replaced: Valjean Reinvented as Monsieur Madeleine
AbstractThis article studies the effect of the possibility that firms change their names over their incentives for choosing high quality. A firm may want to start over under a new name in order to avoid market punishment, if the reputation carried by its former name is too low. We find that that the effect of the name-changing option on incentives is ambiguous. Although the ability of avoiding punishment generally hurts incentives, it may sometimes improve them. Moreover, doing so may be the only way out a low-effort trap. The conditions under which each case obtains are explored.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 447.
Date of creation: 2013
Date of revision:
Reputation; forgiveness; incentives;
Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- D9 - Microeconomics - - Intertemporal Choice
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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