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Reputation in Long-Run Relationships

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  • Alp E. Atakan
  • Mehmet Ekmekci

Abstract

We model a long-run relationship as an infinitely repeated game played by two equally patient agents. In each period, the agents play an extensive-form stage game of perfect information with either locally non-conflicting interests or strictly conflicting interests. There is incomplete information about the type of Player 1, while Player 2's type is commonly known. We show that a sufficiently patient Player 1 can leverage Player 2's uncertainty about his type to secure his highest pay-off, compatible with Player 2's individual rationality, in any perfect Bayesian equilibrium of the repeated game. Copyright 2012, Oxford University Press.

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  • Alp E. Atakan & Mehmet Ekmekci, 2012. "Reputation in Long-Run Relationships," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 451-480.
  • Handle: RePEc:oup:restud:v:79:y:2012:i:2:p:451-480
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    File URL: http://hdl.handle.net/10.1093/restud/rdr037
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    References listed on IDEAS

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    1. Michihiro Kandori, 1992. "The Use of Information in Repeated Games with Imperfect Monitoring," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 581-593.
    2. Michihiro Kandori & Ichiro Obara, 2006. "Less is more: an observability paradox in repeated games," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(4), pages 475-493, November.
    3. Wiseman, Thomas, 2008. "Reputation and impermanent types," Games and Economic Behavior, Elsevier, vol. 62(1), pages 190-210, January.
    4. Martin W. Cripps & George J. Mailath & Larry Samuelson, 2004. "Imperfect Monitoring and Impermanent Reputations," Econometrica, Econometric Society, vol. 72(2), pages 407-432, March.
    5. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 231-251.
    6. Christopher Phelan, 2001. "Public trust and government betrayal," Staff Report 283, Federal Reserve Bank of Minneapolis.
    7. Liu, Qingmin & Skrzypacz, Andrzej, 2009. "Limited Records and Reputation," Research Papers 2030, Stanford University, Graduate School of Business.
    8. Bakos, Yannis & Dellarocas, Chrysanthos, 2003. "Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms," Working papers 4295-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    Cited by:

    1. Salomon, Antoine & Forges, Françoise, 2015. "Bayesian repeated games and reputation," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 70-104.
    2. Monte, Daniel, 2013. "Bounded memory and permanent reputations," Journal of Mathematical Economics, Elsevier, vol. 49(5), pages 345-354.
    3. Atakan, Alp E. & Ekmekci, Mehmet, 2015. "Reputation in the long-run with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 157(C), pages 553-605.
    4. Cesi Berardino & Iozzi Alberto & Valentini Edilio, 2012. "Regulating Unverifiable Quality by Fixed-Price Contracts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-39, September.
    5. Long, Iain W., 2015. "Better feared than loved: Reputations and the motives for conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 114(C), pages 46-61.
    6. Monte, Daniel, 2016. "Reputation with one-sided monitoring: Ignorance as a commitment device," Economics Letters, Elsevier, vol. 144(C), pages 18-21.
    7. Sharma, Priyanka, 2017. "Is more information always better? A case in credit markets," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 269-283.
    8. Mailath, George J. & Samuelson, Larry, 2015. "Reputations in Repeated Games," Handbook of Game Theory with Economic Applications, Elsevier.
    9. repec:eee:jeborg:v:145:y:2018:i:c:p:320-334 is not listed on IDEAS
    10. Wolitzky, Alexander, 2011. "Indeterminacy of reputation effects in repeated games with contracts," Games and Economic Behavior, Elsevier, vol. 73(2), pages 595-607.
    11. Anbarci, Nejat & Feltovich, Nick, 2018. "How fully do people exploit their bargaining position? The effects of bargaining institution and the 50–50 norm," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 320-334.
    12. Atakan, Alp Enver & Ekmekci, Mehmet, 2014. "Reputation in Repeated Moral Hazard Games," MPRA Paper 54427, University Library of Munich, Germany.
    13. Nuh Aygün Dalkıran, 2016. "Order of limits in reputations," Theory and Decision, Springer, vol. 81(3), pages 393-411, September.
    14. Joyee Deb & Yuhta Ishii, 2016. "Reputation Building under Uncertain Monitoring," Cowles Foundation Discussion Papers 2042, Cowles Foundation for Research in Economics, Yale University.

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