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When is Reputation Bad?

  • Jeffery Ely
  • Drew Fudenberg
  • David Levine

In traditional reputation models, the ability to build a reputation is good for the long-run player. In [Ely, J., Valimaki, J., 2003. Bad reputation. NAJ Econ. 4, 2; http://www.najecon.org/v4.htm. Quart. J. Econ. 118 (2003) 785-814], Ely and Valimaki give an example in which reputation is unambiguously bad. This paper characterizes a class of games in which that insight holds. The key to bad reputation is that participation is optional for the short-run players, and that every action of the long-run player that makes the short-run players want to participate has a chance of being interpreted as a signal that the long-run player is "bad." We allow a broad set of commitment types, allowing many types, including the "Stackelberg type" used to prove positive results on reputation. Although reputation need not be bad if the probability of the Stackelberg type is too high, the relative probability of the Stackelberg type can be high when all commitment types are unlikely.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1358.

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Date of creation: Oct 2002
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Handle: RePEc:nwu:cmsems:1358
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  1. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
  2. D. Fudenberg & D. M. Kreps & E. Maskin, 1998. "Repeated Games with Long-run and Short-run Players," Levine's Working Paper Archive 608, David K. Levine.
  3. D. Fudenberg & D. K. Levine, 1994. "Efficiency and Observability with Long-Run and Short-Run Players," Levine's Working Paper Archive 627, David K. Levine.
  4. George J. Mailath & Larry Samuelson, 2000. "Who Wants a Good Reputation?," CARESS Working Papres sell-rep, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  5. Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Marco Celentani, 1993. "Maintaining a Reputation Against A Long-Lived Opponent," Discussion Papers 1075R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Drew Fudenberg & David Levine, 1987. "Reputation and Equilibrium Selection in Games With a Patient Player," Working papers 461, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Fudenberg, D., 1991. "Maintaining a Reputation when Strategies are Imperfectly Observed," Working papers 589, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. George J. Mailath & Larry Samuelson, 1998. "Your Reputation Is Who You're Not, Not Who You'd Like To Be," CARESS Working Papres rep-is-sep, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  10. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
  11. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
  12. Marco Celentani & Drew Fudenberg & David K Levine & Wolfgang Pesendorfer, 2006. "Maintaining A Reputation Against A Patient Opponent," Levine's Working Paper Archive 699152000000000019, David K. Levine.
  13. Fudenberg, Drew & Kreps, David M, 1987. "Reputation in the Simultaneous Play of Multiple Opponents," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 541-68, October.
  14. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  15. Sorin, Sylvain, 1999. "Merging, Reputation, and Repeated Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 274-308, October.
  16. Mailath, George J & Samuelson, Larry, 2001. "Who Wants a Good Reputation? Erratum," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 714, July.
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