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Reputation in Long-Run Relationships

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  • Alp Atakan
  • Mehmet Ekmekci

Abstract

We model a long-run relationship as an infinitely repeated game played by two equally patient agents. In each period, the agents play an extensive-form game of perfect information. There is incomplete information about the type of player 1 while player 2’s type is commonly known. We show that a sufficiently patient player 1 can leverage player 2’s uncertainty about his type to secure his highest payoff in any perfect Bayesian equilibrium of the repeated game.

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Bibliographic Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1507.

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Date of creation: 01 Dec 2009
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Handle: RePEc:nwu:cmsems:1507

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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
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Web page: http://www.kellogg.northwestern.edu/research/math/
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Keywords: Repeated Games; Reputation; Equal Discount Factor; Long-run Players. JEL Classification Numbers: C73; D83;

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References

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  1. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 231-251, 04.
  2. Martin W. Cripps & George J. Mailath & Larry Samuelson, 2002. "Imperfect Monitoring and Impermanent Reputations," PIER Working Paper Archive 03-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 30 May 2003.
  3. Liu, Qingmin & Skrzypacz, Andrzej, 2009. "Limited Records and Reputation," Research Papers 2030, Stanford University, Graduate School of Business.
  4. Kandori, Michihiro, 1992. "The Use of Information in Repeated Games with Imperfect Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 581-93, July.
  5. Wiseman, Thomas, 2008. "Reputation and impermanent types," Games and Economic Behavior, Elsevier, vol. 62(1), pages 190-210, January.
  6. Michihiro Kandori & Ichiro Obara, 2006. "Less is more: An Observability Paradox in Repeated Games," Levine's Bibliography 321307000000000342, UCLA Department of Economics.
  7. Bakos, Yannis & Dellarocas, Chrysanthos, 2003. "Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms," Working papers 4295-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Christopher Phelan, 2001. "Public trust and government betrayal," Staff Report 283, Federal Reserve Bank of Minneapolis.
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Cited by:
  1. Atakan, Alp Enver & Ekmekci, Mehmet, 2014. "Reputation in Repeated Moral Hazard Games," MPRA Paper 54427, University Library of Munich, Germany.
  2. Monte, Daniel, 2013. "Bounded memory and permanent reputations," Journal of Mathematical Economics, Elsevier, vol. 49(5), pages 345-354.
  3. Francoise Forges & Antoine Salomon, 2014. "Bayesian repeated games and reputation," Working Papers hal-00803919, HAL.

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