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Incentives and Reputation when Names can be Replaced: Valjean Reinvented as Monsieur Madeleine

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Listed:
  • Bernardita Vial
  • Felipe Zurita

Abstract

This article studies the effect of the possibility that firms change their names over their incentives for choosing high quality. A firm may want to start over under a new name in order to avoid market punishment, if the reputation carried by its former name is too low. We find that that the effect of the name-changing option on incentives is ambiguous. Although the ability of avoiding punishment generally hurts incentives, it may sometimes improve them. Moreover, doing so may be the only way out a low-effort trap. The conditions under which each case obtains are explored.

Suggested Citation

  • Bernardita Vial & Felipe Zurita, 2013. "Incentives and Reputation when Names can be Replaced: Valjean Reinvented as Monsieur Madeleine," Documentos de Trabajo 447, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:447
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    File URL: https://www.economia.uc.cl/docs/doctra/dt-447.pdf
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    References listed on IDEAS

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    1. Steven Tadelis, 1999. "What's in a Name? Reputation as a Tradeable Asset," American Economic Review, American Economic Association, vol. 89(3), pages 548-563, June.
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    5. Bernardita Vial & Felipe Zurita, 2013. "Reputation-Driven Industry Dynamics," Documentos de Trabajo 436, Instituto de Economia. Pontificia Universidad Católica de Chile..
    6. 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.
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    9. Ekmekci, Mehmet, 2011. "Sustainable reputations with rating systems," Journal of Economic Theory, Elsevier, vol. 146(2), pages 479-503, March.
    10. Bar-Isaac, Heski & Tadelis, Steven, 2008. "Seller Reputation," Foundations and Trends(R) in Microeconomics, now publishers, vol. 4(4), pages 273-351, August.
    11. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 231-251.
    12. Ryan C. McDevitt, 2011. "Names and Reputations: An Empirical Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 193-209, August.
    13. Vial Bernardita, 2010. "Walrasian Equilibrium and Reputation under Imperfect Public Monitoring," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-44, May.
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    Cited by:

    1. Bernardita Vial & Felipe Zurita, 2017. "Entrants' Reputation And Industry Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(2), pages 529-559, May.

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    More about this item

    Keywords

    Reputation; forgiveness; incentives;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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