New, Like New, or Very Good? Reputation and Credibility
We show that sellers may earn reputation for their \ability" to deliver high quality goods on average by honestly announcing the realised quality of items for sale every period. As the expected revenue stream from continuing with honest communication increases with their ability, high ability sellers remain honest while low ability sellers find it too costly and sometimes lie about quality for short-term gain. Thus, cheap-talk communication facilitates the market's learning of a seller's ability and strengthens reputation effects. We study this new reputation mechanism and the induced market dynamics, first when sellers cannot restart with a new identity and then when they can. We extend the analysis to various other situations such as voluntary refund and moral hazard.
|Date of creation:||Jul 2009|
|Date of revision:||27 Jan 2014|
|Publication status:||Published in The Review of Economic Studies, vol.�81, n°4, mars 2014, p.�1543-1574.|
|Contact details of provider:|| Postal: Manufacture des Tabacs, Aile Jean-Jacques Laffont, 21 Allée de Brienne, 31000 TOULOUSE|
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- Andrew Atkeson & Christian Hellwig & Guillermo OrdoÃ±ez, 2015.
"Optimal Regulation in the Presence of Reputation Concerns,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 130(1), pages 415-464.
- Andrew Atkeson & Christian Hellwig & Guillermo Ordonez, 2012. "Optimal Regulation in the Presence of Reputation Concerns," NBER Working Papers 17898, National Bureau of Economic Research, Inc.
- Andrew Atkeson & Christian Hellwig & Guillermo L. Ordonez, 2012. "Optimal regulation in the presence of reputation concerns," Staff Report 464, Federal Reserve Bank of Minneapolis.
- Atkeson, Andrew & Hellwig, Christian & Ordoñez, Guillermo, 2014. "Optimal Regulation in the Presence of Reputation Concerns," CEPR Discussion Papers 10080, C.E.P.R. Discussion Papers.
- Guillermo Ordonez & Andrew Atkeson, 2009. "Optimal Regulation in the Presence of Reputation Concerns," 2009 Meeting Papers 830, Society for Economic Dynamics.
- Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, July.
- Ginger Zhe Jin & Andrew Kato, 2006. "Price, quality, and reputation: evidence from an online field experiment," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 983-1005, December.
- Simon Board & Moritz Meyer‐ter‐Vehn, 2013.
"Reputation for Quality,"
Econometric Society, vol. 81(6), pages 2381-2462, November.
- repec:oup:restud:v:52:y:1985:i:4:p:557-73 is not listed on IDEAS
- repec:rje:randje:v:37:y:2006:i:4:p:983-1005 is not listed on IDEAS
- Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
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