reputation and impermanent types i consider a version of the chain store game where the incumbent firm s type evolves according to a markov process with two states a tough type who always fights entry and a weak type who prefers to accommodate there exists a minimal level of persistence necessary for the incumbent to be able to sustain any reputation for being tough above that level as the number of markets t increases in equilibrium play alternates between intervals of entry by competitors and intervals of deterrence when t is infinite then regardless of the discount factor there exists a sequential equilibrium in which the incumbent s payoff is bounded below her stackelberg payoff both results are in contrast to the outcome when the incumbent s type is fixed one interpretation is that reputation is not permanent but must be renewed occasionally

reputation and prices on the e market evidence from a major french platform we use an exhaustive data set from one of france s largest e commerce platforms priceminister com to estimate a statistical causal effect of a seller s reputation rating and size on transaction prices we go beyond the results currently available by tackling the issue of seller unobserved heterogeneity and the dynamics of reputation in price equations we can also produce results for a large range of product categories books cds video games or dvds product conditions used or new and seller types individual or professional sellers our results show large scale empirical evidence of a significant positive and strong effect of seller reputation on prices

experts and quacks what happens when type is endogenous in a reputational setting here customers cannot tell experts from imitative quacks but gain information through repeated interaction firm incentives to invest in expertise vary nonmonotonically in how tolerant customers are of bad outcomes more tolerant customers are both more forgiving making expertise less necessary and longer tenured increasing the value of retaining them in equilibrium the proportion of expert firms is bounded away from one some quacks are necessary to keep incentives of experts in line the fraction of experts is decreasing in customers switching costs and the relative cost of expertise over quackery

street crime and street culture a model shows how reputation concerns can support widespread street crime a street culture where the direct incentives for such behavior are weak there are social benefits to street reputations but those benefits are dominated when reputation concerns draw into crime those who obtain no direct gain from it the model matches facts about violent crime that a standard model cannot easily explain including low monetary returns disproportionate victimization of the young and poor and high variance in rates across small distances the model generates novel implications for policy and social science including a negative effect of social capital

government policy and performance of the indian engineering industry abstract a major liberalization of the indian industrial policy framework has been undertaken in the 1980s the proponents of liberalization expected not only a general increase in the efficiency of indian industry but also an improvement in its innovative performance detailed industry studies as well as macro level data suggest that the simultaneous liberalization of industrial licence and foreign technological collaboration policies resulted in a large scale entry of new firms into a range of industries industry structures best characterized as miniature replications of the global industry were created chiefly in response to an inherently large demand for foreign disembodied technology in the indian industrialization model foreign technological collaborations became the overwhelming source of product technology in the process the indian capital goods industry has been given the opportunity to better fulfil its role as diffuser of globally generated new technology to indian customers in doing so the liberalization measures have been successful in improving the performance of indian industry within the limits of an import substituting industrialization model the extremely fierce competitive situation coupled with nearly free access to foreign technology has however not been associated with an improvement in the indian engineering industry s innovative performance indeed the greater domestic competition has been associated with greater technology imports rather than greater in house innovative efforts

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

optimal dynamic information provision abstract we study a dynamic model of information provision a state of nature evolves according to a markov chain an advisor with commitment power decides how much information to provide to an uninformed decision maker so as to influence his short term decisions we deal with a stylized class of situations in which the decision maker has a risky action and a safe action and the payoff to the advisor only depends on the action chosen by the decision maker the greedy disclosure policy is the policy which at each stage minimizes the amount of information being disclosed in that stage under the constraint that it maximizes the current payoff of the advisor we prove that the greedy policy is optimal in many cases but not always

the behaviour of u k export prices of manufactured goods 1970 1983 this paper examines the importance of expectations in the determination of u k export prices export prices are found to depend upon expectations of total domestic unit costs and foreign prices the non linear restrictions implied by the forward looking model are found to hold and it performs adequately relative to a backward looking error feedback model the law of one price is rejected and the evidence is consistent with imperfect competition in export markets

managerial incentive problems a dynamic perspective the paper studies how a person s concern for a future career may influence his or her incentives to put in effort or make decisions on the job in the model the person s productive abilities are revealed over time through observations of performance there are no explicit output contingent contracts but since the wage in each period is based on expected output and expected output depends on assessed ability an implicit contract links today s performance to future wages an incentive problem arises from the person s ability and desire to influence the learning process and therefore the wage process by taking unobserved actions that affect today s performance the fundamental incongruity in preferences is between the individual s concern for human capital returns and the firm s concern for financial returns the two need be only weakly related it is shown that career motives can be beneficial as well as detrimental depending on how well the two kinds of capital returns are aligned it is well understood by now that informational externalities may place special demands on the organization of economic exchange simple price mediated markets will frequently fail in the presence of asymmetric information in that case more elaborate contractual arrangements have to be used as substitutes for the price system lately considerable effort has been devoted to the analysis of contracting under incomplete information with the objective to understand the range of economic institutions that emerge in response to the failure of the price system the analysis of moral hazard has played a prominent role in this development moral hazard problems arise when for some reason or another transacting parties cannot contract contingent on the delivery of the good for instance in buying labour services it may be that the amount of labour supplied is not directly observable precluding a simple exchange of wage for labour as a partial remedy to this problem an imperfect mutually observed signal about the supply of labour can be used as a proxy in the contract frequently output is taken as such a proxy the drawback is that output is often influenced by other factors than labour input which induce undesirable risk into the contract one is therefore faced with a tradeoff between allocating risk associated with incomplete observability and providing incentives for a proper supply of labour gaining insight into this tradeoff is important not only for understanding contracting in the small e g managerial incentive schemes but also because it is closely related to the fundamental tension between equity and efficiency in the society as a whole while our understanding of moral hazard has advanced a lot in past years it is clear that much work remains an important question that has received little attention until

can green building councils serve as third party governance institutions an economic and institutional analysis abstract green building councils gbcs have been established in many different countries in recent years this paper discusses the role such organizations can play in the respective construction and real estate industry and under what circumstances a gbc can contribute positively to the development of a greener or more sustainable stock of buildings the paper investigates the main informational problem of the industry by looking at the relation between a developer and an investor from an economic point of view we argue that the investor s uncertainty about the true quality of a building and the corresponding incentive for the developer to cheat may lock them into a prisoners dilemma trap the corresponding barriers for a transition toward a greener buildings market are analyzed gbcs are described as institutions of economic governance that can assist the economy in overcoming these problems they can act as third party institutions in transactions between developers and investors by certifying the quality of a building they can reduce the risk for the investor to be cheated by the developer and also increase the incentive to develop good quality buildings for the developer this task however raises some severe management challenges for the gbcs

tax on name abstract how to tax the name we answer this question by introducing a name market in the sense of tadelis 1999 into an endogenous growth model in which an informational asymmetry exists between capital producing borrowers and lenders we show a name market endogenously arises to screen the borrowers but at the cost of crowding out investment we derive the optimal name price that trades off the screening effect and the crowding out effect and show this optimal price decreases with the investor protection level an optimal tax scheme should tax the name to this optimal price and reimburse the tax revenue to the name buyer when the investor protection level is low the net worth could be lower than the optimal name price so capital income tax shall be allowed to subsidy the name purchase to activate the name market overall we show the optimal tax scheme in the presence of a name market depends crucially on the country s investor protection level

gambling reputation repeated bargaining with outside options we study the role of incomplete information and outside options in determining bargaining postures and surplus division in repeated bargaining between a long run player and a sequence of short run players the outside option is not only a disagreement point but reveals information privately held by the long run player in equilibrium the uninformed short run players offers do not always respond to changes in reputation and the informed long run player s payoffs are discontinuous the long run player invokes inefficient random outside options repeatedly to build reputation to a level where the subsequent short run players succumb to his extraction of a larger payoff but he also runs the risk of losing reputation and relinquishing bargaining power we investigate equilibrium properties when the discount factor goes to 1 and when the informativeness of outside options diffuses in both cases bargaining outcomes become more inefficient and the limit reputation building probabilities are interior publication abstract

return to tourist destination is it reputation after all in this paper the hypothesis that repeated purchases in the tourism markets could be considered as a consequence of asymmetrical information problems is studied this hypothesis is analysed with the case study of the island of tenerife using the estimation of a count data model it was found that the length of the stay and the information obtained from previous visits and or relatives and friends might increase the return to a destination suggesting the presence of a reputation mechanism as proposed by shapiro 1983 the determinants of the willingness to return were also estimated confirming the main results

sluggish quantity adjustment in a non clearing market a disequilibrium econometric application to the loan market the paper argues that the estimated speed of price adjustment in a disequilibrium econometric model is likely to be biased if allowance is not made for quantity adjustment inertia on both sides of the market furthermore if the model estimated is static rather than dynamic then in certain circumstances an excess demand regime may be mistaken for one of excess supply and vice versa in an empirical application to the loan market for the clearing banks in ireland we can claim to have obtained some support for this belief

what s in a name reputation as a tradeable asset the author develops a model in which a firm s only asset is its name which summarizes its reputation and studies the forces that cause names to be valuable tradable assets an adverse selection model in which shifts of ownership are not observable guarantees an active market for names with either finite or infinite horizons no equilibrium exists in which only good types buy good names the reputational dynamics that emerge from the model are more realistic than those in standard game theoretic reputation models and suggest that adverse selection plays a crucial role in understanding firm reputation

reputation and competition this paper shows how competition generates reputation building behavior in repeated interactions when the product quality observed by consumers is a noisy signal of firms effort level there are two types of firms and good firms try to distinguish themselves from bad firms although consumers get convinced that firms which are repeatedly successful in providing high quality are good firms competition endogenously generates the outside option inducing disappointed consumers to leave firms this threat of exit induces good firms to choose high effort allowing good reputations to be valuable but its uncompromising execution forces good firms out of the market jel c7 d8

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

price and quality cycles for experience goods we explore a dynamic competitive model for experience goods and study an equilibrium for it in which firms plan initially to produce high quality at low price then high quality at high price then low quality at high price each consumer is aware that all firms eventually intend to run down their reputations at customers expense yet he rationally chooses to wait for direct evidence that the firm to which he is attached has already entered into the exploitative phase

the simple economics of bank regulation this paper discusses the effects of central bank regulation of the banking system carried out to control the level of bank lending prudential regulation designed to reduce the frequency of bank failure a problem in the economics of uncertainty and information is not considered the main point of this paper is that bank regulation in so far as it is effective and goes beyond the general effects of government intervention in credit markets can be seen as a tax on transactions intermediated through banks the variations in the incidence and beneficiaries of the tax provide a convenient framework for the different regulatory schemes the paper focuses on the effect of regulation on an individual bank the theory presented here is an elementary comparative static one based on the equality of marginal cost and marginal revenue it does not consider the more complicated issues of dynamic control however it is unlikely that any policy that has unsatisfactory comparative static properties will be successful the main ideas of this approach are due to tobin 1963 and johnson 1967 197 1 they have been further developed in work by spencer and mowl 1978 and artis and miller 1978 however the application of the analysis to the effects of different types of regulation is i believe new a general equilibrium model in the same spirit as the partial equilibrium model used here is given by fama 1980 the following section presents a simple model of the banking system section ii discusses the effect of government intervention and regulation and section iii looks at the way in which government regulation induces disintermediation section iv applies the previous results to consider various actual or proposed schemes in practice the final section draws conclusions

corporate bank borrowing in the uk 1965 1981 the instability of demand for money equations in both the united states and the united kingdom in the 1970s has reinforced the view that money holdings may usefully be viewed as buffer stocks and that observed movements in broad monetary aggregates may reflect supply side shocks predominantly caused by changes in bank lending to the private sector judd and scadding 1981 goodhart 1982 laidler 1983 this paper presents some new econometric results for uk bank lending to industrial and commercial companies iccs the results are consistent with the view that the quantity of bank borrowing is largely demand determined and as such they provide additional support for the view of a credit driven money stock coghlan 1981 moore 1979 1983 the demand for bank credit by iccs appears highly interest inelastic at least within the single equation framework of this paper finally the policy implications of the study suggest that contrary to some previous work during the period considered 1965 to mid 1981 the bank of england was largely unsuccessful in its attempts to control bank lending by discriminatory regulation gowland 1978 artis and lewis 1981

commitment in utility regulation a model of reputation and policy applications abstract this paper builds a dynamic model of utility regulation where a government cannot commit to a time inconsistent policy of not expropriating investment by allowing the government s type to change over time i explore how reputation concerns may generate partial commitment restricting attention to equilibria that are strongly renegotiation proof i show that there is a unique perfect bayesian equilibrium this contains episodes of investment and good behaviour followed by periods of expropriation and non investment i then apply the model to consider how the power of the incentive scheme and decentralization may influence the properties of this equilibrium in the case of the power of incentives the model suggests that price caps may worsen commitment in developing countries but not in developed ones similarly the model suggests that decentralisation is likely to have a significant effect on commitment but that this effect will depend on the general ability of the government to commit overall we conclude that the effect of such policies on commitment will be different across countries depending on the institutional environment

information acquisition and reputation dynamics we study dynamic incentives and behaviour in markets with costly discovery of past transactions in our model a sequence of short lived customers interact over time with a single long lived firm that privately knows its type good or opportunistic customers must pay to observe the firm s past behaviour we characterize the equilibrium structure that features accumulation consumption and restoration of reputation the opportunistic firm deliberately builds its reputation up to a point where the maximum periods of information acquired by customers do not reveal past opportunistic behaviour and exploits the customers who most trust the firm copyright 2011 oxford university press

political booms financial crises political booms measured by the rise in governments popularity predict financial crises above and beyond better known early warning indicators such as credit booms this predictive power howev

who wants a good reputation we examine a market in which long lived firms face a short term incentive to exert low effort but could earn higher profits if it were possible to commit to high effort there are two types of firms inept firms who can only exert low effort and competent firms who have a choice between high and low effort there is occasional exit and competent and inept potential entrants compete for the right to inherit the departing firm s reputation consumers receive noisy signals of effort choice and so competent firms choose high effort in an attempt to distinguish themselves from inept firms a competent firm is most likely to enter the market by purchasing an average reputation in the hopes of building it into a good reputation than either a very low reputation or a very high reputation inept firms in contrast find it more profitable to either buy high reputations and deplete them or buy low reputations

maintaining a reputation when strategies are imperfectly observed this paper studies reputation effects in games with a single long run player whose choice of stage game strategy is imperfectly observed by his opponents we obtain lower and upper bounds on the long run player s payoff in any nash equilibrium of the game if the long run player s stage game strategy is statistically identified by the observed outcomes then for generic payoffs the upper and lower bounds both converge as the discount factor tends to 1 to the long run player s stackelberg payoff which is the most he could obtain by publicly committing himself to any strategy

quality incentives for gps in a regulated market abstract this paper analyses whether gps in a capitation system have incentives to provide quality even though health is a credence good a model is developed where the quality of the service varies due to inherent differences between the gps and rational patients make choices based on the outcome of treamtent we find that it is difficult to provide appropriate incentives since the search activity of patients offsets direct effects of a change in reimbursement variation in the inherent ability of the gps is good since it increases the search activity of the patients and the optimal reimbursement scheme is inversely proportional to the dispersion in types finally we find that offering a menu of contracts can potentially increase social welfare above the level of a simple capitation regime but it tends to lead to a higher variation in quality levels