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Reputation and Turnover

Author

Listed:
  • Rafael Rob

    (University of Pennsylvania)

  • Tadashi Sekiguchi

    (Kobe University)

Abstract

We consider a repeated duopoly game where each firm privately chooses its investment in quality, and realized quality is a noisy indicator of the firm's investment.We focus on turnover equilibria in which a low-quality realization is penalized by lowering future demand of the firm that delivered this quality. We determine when a turnover equilibrium that gives higher welfare than the static equilibrium exists and how this relates to market fundamentals. We also derive comparative statics properties, and we characterize a set of investment levels and, hence, payoffs that turnover equilibria sustain.

Suggested Citation

  • Rafael Rob & Tadashi Sekiguchi, 2006. "Reputation and Turnover," RAND Journal of Economics, The RAND Corporation, vol. 37(2), pages 341-361, Summer.
    • Handle: RePEc:rje:randje:v:37:y:2006:2:p:341-361
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    Cited by:

    1. Pak Hung Au & Yuk‐Fai Fong & Jin Li, 2020. "Negotiated Block Trade And Rebuilding Of Trust," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(2), pages 901-939, May.
    2. Alcalá, Francisco & González-Maestre, Miguel & Martínez-Pardina, Irene, 2014. "Information and quality with an increasing number of brands," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 109-117.
    3. Daniel Monte & Ideen Riahi & Nikolaus Robalino, 2019. "Collusion and turnover in experience goods markets," Review of Economic Design, Springer;Society for Economic Design, vol. 23(3), pages 91-111, December.
    4. Du, Chuang, 2012. "Solving payoff sets of perfect public equilibria: an example," MPRA Paper 38622, University Library of Munich, Germany.
    5. Takaomi Notsu, 2023. "Collusion with capacity constraints under a sales maximization rationing rule," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(2), pages 485-516, June.

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