Bad Reputation under Bounded and Fading Memory
I relax the full memory assumption in Ely and Valimaki's (2003) mechanic game, where reputation is bad for all players. First I consider "bounded memory," where only finitely many recent periods are observed. For long memory, reputation is still bad. Shortening memory avoids bad reputation but only by making it "useless." There is no "happy middle:" reputation is either useless or reduces equilibrium payoffs for any memory length. I find a qualitatively different result for "fading memory," where players randomly sample past periods with probabilities "fading" toward zero. Unlike bounded memory, reputation is not bad but remains useful under sufficiently fast fading. This result extends to a more general class of both good and bad reputation games, suggesting reputation leaves long-run player behavior unaffected in some realistic word-of-mouth environments.
|Date of creation:||Dec 2015|
|Contact details of provider:|| Postal: 206 Tilton Hall, New Orleans, LA 70118|
Phone: (504) 865-5321
Fax: (504) 865-5869
Web page: http://econ.tulane.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Liu, Qingmin & Skrzypacz, Andrzej, 2014. "Limited records and reputation bubbles," Journal of Economic Theory, Elsevier, vol. 151(C), pages 2-29.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, July.
- Mailath, George J. & Olszewski, Wojciech, 2011.
"Folk theorems with bounded recall under (almost) perfect monitoring,"
Games and Economic Behavior,
Elsevier, vol. 71(1), pages 174-192, January.
- George Mailath & Wojciech Olszewski, 2008. "Folk theorems with Bounded Recall under(Almost) Perfect Monitoring," Discussion Papers 1462, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- George J. Mailath & Wojciech Olszewski, 2008. "Folk Theorems with Bounded Recall under (Almost) Perfect Monitoring," PIER Working Paper Archive 08-019, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:tul:wpaper:1527. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rodrigo Aranda Balcazar)
If references are entirely missing, you can add them using this form.