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Competition and Reputation

Author

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  • Juan Pablo Nicolini

    ()

  • Ramon Marimon
  • Pedro Teles

Abstract

We study the interaction of competition and reputation as efficiency enhancing mechanisms in environments where informational or lack of commitment constraints affect the ability of firms to compete for market shares. We first analyze a dynamic model of monopolistic competition with experience goods. If beliefs satisfy a minimal regularity condition, there is a unique equilibrium with quality goods being produced and the price has a mark-up which is either the full information monopolistic mark-up or, if this is not sustainable (e.g., when goods are very close substitutes), the rate of time preference, that acts as a reputation constraint. A variation of the model allows us to analyze the private provision of currencies. We show that if suppliers of currency decide their actions sequentially, and beliefs satisfy the regularity condition, the equilibrium exhibits a zero inflation rate, so that the efficient outcome is not achieved.

Suggested Citation

  • Juan Pablo Nicolini & Ramon Marimon & Pedro Teles, 2000. "Competition and Reputation," Department of Economics Working Papers 002, Universidad Torcuato Di Tella.
  • Handle: RePEc:udt:wpecon:002
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    Cited by:

    1. Marimon, Ramon & Nicolini, Juan Pablo & Teles, Pedro, 2003. "Inside-outside money competition," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1701-1718, November.
    2. Ramon Marimon, 2000. "Review of Sargent's The Conquest of American Inflation," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 405-411, June.

    More about this item

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D00 - Microeconomics - - General - - - General

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