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When is reputation bad?

Author Info

  • Ely, Jeffrey
  • Fudenberg, Drew
  • Levine, David K.

Abstract

In traditional reputation models, the ability to build a reputation is good for the long-run player. In [Ely, J., Valimaki, J., 2003. Bad reputation. NAJ Econ. 4, 2; http://www.najecon.org/v4.htm. Quart. J. Econ. 118 (2003) 785-814], Ely and Valimaki give an example in which reputation is unambiguously bad. This paper characterizes a class of games in which that insight holds. The key to bad reputation is that participation is optional for the short-run players, and that every action of the long-run player that makes the short-run players want to participate has a chance of being interpreted as a signal that the long-run player is "bad." We allow a broad set of commitment types, allowing many types, including the "Stackelberg type" used to prove positive results on reputation. Although reputation need not be bad if the probability of the Stackelberg type is too high, the relative probability of the Stackelberg type can be high when all commitment types are unlikely.

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File URL: http://www.sciencedirect.com/science/article/pii/S0899-8256(06)00105-9
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 63 (2008)
Issue (Month): 2 (July)
Pages: 498-526

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Handle: RePEc:eee:gamebe:v:63:y:2008:i:2:p:498-526
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Fudenberg, D., 1991. "Maintaining a Reputation when Strategies are Imperfectly Observed," Working papers 589, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. George J. Mailath & Larry Samuelson, . ""Your Reputation Is Who You're Not, Not Who You'd Like To Be''," CARESS Working Papres 98-11, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  3. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
  4. Marco Celentani & Drew Fudenberg & David K Levine & Wolfgang Pesendorfer, 2006. "Maintaining A Reputation Against A Patient Opponent," Levine's Working Paper Archive 699152000000000019, David K. Levine.
  5. Drew Fudenberg & David K. Levine, 1995. "Reputation and Equilibrium Selection in Games with a Patient Player," Levine's Working Paper Archive 103, David K. Levine.
  6. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
  7. Drew Fudenberg & David M. Kreps & Eric S. Maskin, 1990. "Repeated Games with Long-run and Short-run Players," Review of Economic Studies, Oxford University Press, vol. 57(4), pages 555-573.
  8. Drew Fudenberg & David M. Kreps, 1987. "Reputation in the Simultaneous Play of Multiple Opponents," Review of Economic Studies, Oxford University Press, vol. 54(4), pages 541-568.
  9. Sorin, Sylvain, 1999. "Merging, Reputation, and Repeated Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 274-308, October.
  10. Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 2058, David K. Levine.
  11. Fudenberg Drew & Levine David K., 1994. "Efficiency and Observability with Long-Run and Short-Run Players," Journal of Economic Theory, Elsevier, vol. 62(1), pages 103-135, February.
  12. George J. Mailath & Larry Samuelson, . ""Who Wants a Good Reputation?''," CARESS Working Papres 98-12, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  13. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
  14. Marco Celentani, 1993. "Maintaining a Reputation Against A Long-Lived Opponent," Discussion Papers 1075R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Jeffrey C. Ely & Juuso Välimäki, 2003. "Bad Reputation," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 785-814.
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