Reputation and Turnover
AbstractWe consider a repeated duopoly game where each firm privately chooses its investment in quality, and realized quality is a noisy indicator of the firm's investment. We focus on dynamic reputation equilibria, whereby consumers "discipline" a firm by switching to its rival in the case that the realized quality of its product is too low. This type of equilibrium is characterized by consumers' tolerance level - the level of product quality below which consumers switch to the rival firm - and firms' investment in quality. Given consumers' tolerance level, we determine when a dynamic equilibrium that gives higher welfare than the static equilibrium exists. We also derive comparative statics properties, and characterize a set of investment levels and, hence, payoffs that our equilibria sustain.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 594.
Length: 25 pages
Date of creation: Aug 2004
Date of revision:
Contact details of provider:
Postal: Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501
Web page: http://www.kier.kyoto-u.ac.jp/eng/index.html
More information through EDIRC
Reputation; consumer switching; moral hazard; repeated games;
Other versions of this item:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ippolito, Richard A, 1992. "Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 35(1), pages 45-70, April.
- Fudenberg, D. & Levine, D.K. & Maskin, E., 1989.
"The Folk Theorem With Inperfect Public Information,"
Working papers, Massachusetts Institute of Technology (MIT), Department of Economics
523, Massachusetts Institute of Technology (MIT), Department of Economics.
- Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, Econometric Society, vol. 62(5), pages 997-1039, September.
- Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 394, David K. Levine.
- Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 2058, David K. Levine.
- Chalk, Andrew J, 1987. "Market Forces and Commercial Aircraft Safety," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 36(1), pages 61-81, September.
- Kreps, David M. & Wilson, Robert, 1982.
"Reputation and imperfect information,"
Journal of Economic Theory, Elsevier,
Elsevier, vol. 27(2), pages 253-279, August.
- Radner, Roy & Myerson, Roger & Maskin, Eric, 1986. "An Example of a Repeated Partnership Game with Discounting and with Uniformly Inefficient Equilibria," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(1), pages 59-69, January.
- Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 615-41, August.
- Cai, Hongbin, 2004.
"Firm Reputation and Horizontal Integration,"
Santa Cruz Department of Economics, Working Paper Series
qt6rk9f1fm, Department of Economics, UC Santa Cruz.
- Hongbin Cai & Ichiro Obara, 2006. "Firm Reputation and Horizontanl Integration," Levine's Bibliography 321307000000000285, UCLA Department of Economics.
- Hongbin Cai & Ichiro Obara, 2008. "Firm Reputation and Horizontal Integration," Levine's Working Paper Archive 122247000000002038, David K. Levine.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ryo Okui).
If references are entirely missing, you can add them using this form.