Giving Gossips Their Due: Information Provision in Games with Private Monitoring
AbstractThe ability of a long-lived seller to maintain and profit from a good reputation may induce her to provide high quality or effort despite short-run incentives to the contrary. This incentive remains in place with private monitoring, provided that buyers share their information. However, this assumption is unrealistic in environments where information sharing is costly or the beneficiaries of a buyer’s sharing are strangers. I study a simple mechanism that induces costly information provision, and may explain such behavior in environments where the incentives are not overt. Agents who possess information may share it with the community and acquire a reputation for gossiping. Reputations function in tandem: sellers provide high effort because they face agents with reputations for information sharing, and expect the outcome of their dealings will be made public, while information holders share their information as a reputation for doing so results in higher effort from sellers.
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Bibliographic InfoPaper provided by EconWPA in its series Game Theory and Information with number 0508002.
Length: 47 pages
Date of creation: 04 Aug 2005
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reputation; moral hazard; information sharing; mechanism design;
Find related papers by JEL classification:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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