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Reputation with Analogical Reasoning

  • Philippe Jehiel
  • Larry Samuelson

We consider a repeated interaction between a long-run player and a sequence of short-run players, in which the long-run player may either be rational or may be a mechanical type who plays the same (possibly mixed) action in every stage game. We depart from the classical model in assuming that the short-run players make inferences by analogical reasoning, meaning that they correctly identify the average strategy of each type of long-run player, but do not recognize how this play varies across histories. Concentrating on 2 � 2 games, we provide a characterization of equilibrium payoffs, establishing a payoff bound for the rational long-run player that can be strictly larger than the familiar "Stackelberg" bound. We also provide a characterization of equilibrium behavior, showing that play begins with either a reputation-building or a reputation-spending stage (depending on parameters), followed by a reputation-manipulation stage. Copyright 2012, Oxford University Press.

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Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 127 (2012)
Issue (Month): 4 ()
Pages: 1927-1969

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Handle: RePEc:oup:qjecon:v:127:y:2012:i:4:p:1927-1969
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  1. Mailath, George J & Samuelson, Larry, 2001. "Who Wants a Good Reputation? Erratum," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 714, July.
  2. Mailath, George J & Samuelson, Larry, 2001. "Who Wants a Good Reputation?," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 415-41, April.
  3. Fudenberg, Drew & Levine, David K, 1989. "Reputation and Equilibrium Selection in Games with a Patient Player," Econometrica, Econometric Society, vol. 57(4), pages 759-78, July.
  4. Martin Cripps & George J Mailath & Larry Samuelson, 2010. "Imperfect Monitoring and Impermanent Reputations," Levine's Working Paper Archive 618897000000000060, David K. Levine.
  5. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
  6. Cripps, Martin W. & Mailath, George J. & Samuelson, Larry, 2007. "Disappearing private reputations in long-run relationships," Journal of Economic Theory, Elsevier, vol. 134(1), pages 287-316, May.
  7. Liu, Qingmin & Skrzypacz, Andrzej, 2009. "Limited Records and Reputation," Research Papers 2030, Stanford University, Graduate School of Business.
  8. Philippe Jeniel, 2001. "Analogy-Based Expectation Equilibrium," Economics Working Papers 0003, Institute for Advanced Study, School of Social Science.
  9. David Ettinger & Philippe Jehiel, 2010. "A Theory of Deception," Post-Print hal-00701286, HAL.
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