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What's in a Name? Reputation as a Tradeable Asset

  • Steven Tadelis

The author develops a model in which a firm's only asset is its name, which summarizes its reputation, and studies the forces that cause names to be valuable, tradable assets. An adverse selection model in which shifts of ownership are not observable guarantees an active market for names with either finite or infinite horizons. No equilibrium exists in which only good types buy good names. The reputational dynamics that emerge from the model are more realistic than those in standard game-theoretic reputation models and suggest that adverse selection plays a crucial role in understanding firm reputation.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.89.3.548
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 3 (June)
Pages: 548-563

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:3:p:548-563
Note: DOI: 10.1257/aer.89.3.548
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  1. Tirole, Jean, 1994. ""A Theory of Collective Reputations" with Applications to the Persistence of Corruption and to Firm Quality," IDEI Working Papers 38, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  3. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
  4. George J. Mailath & Larry Samuelson, . "Your Reputation Is Who You're Not, Not Who You'd Like To Be," Penn CARESS Working Papers bb1b279d6539c9ed3b83a027c, Penn Economics Department.
  5. Douglas Gale & Robert W. Rosenthal, 1992. "Price and Quality Cycles for Experience Goods," Papers 0035, Boston University - Industry Studies Programme.
  6. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  7. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  8. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
  9. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-62, August.
  10. Birger Wernerfelt, 1988. "Umbrella Branding as a Signal of New Product Quality: An Example of Signalling by Posting a Bond," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 458-466, Autumn.
  11. Steven Tadelis, 2003. "Firm reputation with hidden information," Economic Theory, Springer, vol. 21(2), pages 635-651, 03.
  12. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
  13. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
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