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Post-sale service and the limits of reputation

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  • Scott E. Masten
  • Renáta Kosová

Abstract

In the standard durable goods-quality model, the prospect of repeat sales often supports the provision of high-quality durable goods. When durable goods require costly post-sale service, however, a reputational equilibrium may not exist at any price, even with a flow of profitable new sales indefinitely into the future. This article characterizes the size of the premium needed to make provision of post-sale service self enforcing and then uses historical records to assess the self-enforcing post-sale service premia for United Shoe Machinery, IBM, and Xerox. Copyright 2013 The Author 2013. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Suggested Citation

  • Scott E. Masten & Renáta Kosová, 2013. "Post-sale service and the limits of reputation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(6), pages 1663-1698, December.
  • Handle: RePEc:oup:indcch:v:22:y:2013:i:6:p:1663-1698
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    File URL: http://hdl.handle.net/10.1093/icc/dtt004
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    Cited by:

    1. Paul Castãneda Dower & Andrei Bremzen, 2012. "Almost Anonymous Implicit Contracting," Working Papers w0187, Center for Economic and Financial Research (CEFIR).

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