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Information Value and Externalities in Reputation Building - An Experimental Study


  • Gary E Bolton
  • Axel Ockenfels


In sequential equilibrium theory, reputation building is independent of whether the reputation builder is matched with one long-run player or a series of short run players. We observe, however, that reputation builders are significantly more challenged by long-run players in both laboratory chain store and buyer-seller games. Reputation builder behavior is not as unpredictable as required by the mixed equilibrium strategies and so information about the reputation builder’s past behavior has more economic value than equilibrium predicts. This in turn creates more incentives for long-run players to challenge the reputation builder, because they internalize the information externalities from the continuation game.

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  • Gary E Bolton & Axel Ockenfels, 2007. "Information Value and Externalities in Reputation Building - An Experimental Study," Working Paper Series in Economics 35, University of Cologne, Department of Economics, revised 01 Aug 2008.
  • Handle: RePEc:kls:series:0035

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    References listed on IDEAS

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    7. Drew Fudenberg & David K. Levine, 2008. "Reputation And Equilibrium Selection In Games With A Patient Player," World Scientific Book Chapters,in: A Long-Run Collaboration On Long-Run Games, chapter 7, pages 123-142 World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Axel Ockenfels, 2009. "Marktdesign und Experimentelle Wirtschaftsforschung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 10(s1), pages 31-53, May.

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