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Reputation in Long-Run Relationships

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  • Alp Atakan
  • Mehmet Ekmekci

Abstract

We model a long-run relationship as an infinitely repeated game played by two equally patient agents. In each period, the agents play an extensive-form game of perfect information. There is incomplete information about the type of player 1 while player 2’s type is commonly known. We show that a sufficiently patient player 1 can leverage player 2’s uncertainty about his type to secure his highest payoff in any perfect Bayesian equilibrium of the repeated game.

Suggested Citation

  • Alp Atakan & Mehmet Ekmekci, 2009. "Reputation in Long-Run Relationships," Discussion Papers 1507, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1507
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    References listed on IDEAS

    as
    1. Michihiro Kandori & Ichiro Obara, 2006. "Less is more: an observability paradox in repeated games," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(4), pages 475-493, November.
    2. Martin W. Cripps & George J. Mailath & Larry Samuelson, 2004. "Imperfect Monitoring and Impermanent Reputations," Econometrica, Econometric Society, vol. 72(2), pages 407-432, March.
    3. Liu, Qingmin & Skrzypacz, Andrzej, 2009. "Limited Records and Reputation," Research Papers 2030, Stanford University, Graduate School of Business.
    4. Wiseman, Thomas, 2008. "Reputation and impermanent types," Games and Economic Behavior, Elsevier, vol. 62(1), pages 190-210, January.
    5. Michihiro Kandori, 1992. "The Use of Information in Repeated Games with Imperfect Monitoring," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 581-593.
    6. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 231-251.
    7. Christopher Phelan, 2001. "Public trust and government betrayal," Staff Report 283, Federal Reserve Bank of Minneapolis.
    8. Bakos, Yannis & Dellarocas, Chrysanthos, 2003. "Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms," Working papers 4295-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    Citations

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    Cited by:

    1. Salomon, Antoine & Forges, Françoise, 2015. "Bayesian repeated games and reputation," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 70-104.
    2. Atakan, Alp E. & Ekmekci, Mehmet, 2015. "Reputation in the long-run with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 157(C), pages 553-605.
    3. Cesi Berardino & Iozzi Alberto & Valentini Edilio, 2012. "Regulating Unverifiable Quality by Fixed-Price Contracts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-39, September.
    4. Françoise Forges, 2012. "Folk theorems for Bayesian (public good) games," Post-Print hal-02447604, HAL.
    5. Long, Iain W., 2015. "Better feared than loved: Reputations and the motives for conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 114(C), pages 46-61.
    6. Sharma, Priyanka, 2017. "Is more information always better? A case in credit markets," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 269-283.
    7. Mailath, George J. & Samuelson, Larry, 2015. "Reputations in Repeated Games," Handbook of Game Theory with Economic Applications,, Elsevier.
    8. Anbarci, Nejat & Feltovich, Nick, 2018. "How fully do people exploit their bargaining position? The effects of bargaining institution and the 50–50 norm," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 320-334.
    9. Atakan, Alp Enver & Ekmekci, Mehmet, 2014. "Reputation in Repeated Moral Hazard Games," MPRA Paper 54427, University Library of Munich, Germany.
    10. Yuval Heller & Erik Mohlin, 2018. "Observations on Cooperation," Review of Economic Studies, Oxford University Press, vol. 85(4), pages 2253-2282.
    11. Deb, Rahul & Mitchell, Matthew & Pai, Mallesh, 2020. "(Bad) Reputation in Relational Contracting," CEPR Discussion Papers 14408, C.E.P.R. Discussion Papers.
    12. Monte, Daniel, 2013. "Bounded memory and permanent reputations," Journal of Mathematical Economics, Elsevier, vol. 49(5), pages 345-354.
    13. Rahul Deb & Matthew Mitchell & Mallesh Pai, 2019. "Our distrust is very expensive," Working Papers tecipa-632, University of Toronto, Department of Economics.
    14. Monte, Daniel, 2016. "Reputation with one-sided monitoring: Ignorance as a commitment device," Economics Letters, Elsevier, vol. 144(C), pages 18-21.
    15. Ekmekci, Mehmet & Maestri, Lucas, 2019. "Reputation and screening in a noisy environment with irreversible actions," MPRA Paper 100885, University Library of Munich, Germany.
    16. Wolitzky, Alexander, 2011. "Indeterminacy of reputation effects in repeated games with contracts," Games and Economic Behavior, Elsevier, vol. 73(2), pages 595-607.
    17. Nuh Aygün Dalkıran, 2016. "Order of limits in reputations," Theory and Decision, Springer, vol. 81(3), pages 393-411, September.
    18. Joyee Deb & Yuhta Ishii, 2016. "Reputation Building under Uncertain Monitoring," Cowles Foundation Discussion Papers 2042, Cowles Foundation for Research in Economics, Yale University.

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