Reputation and Competition

S-Tier
Journal: American Economic Review
Year: 2002
Volume: 92
Issue: 3
Pages: 644-663

Authors (1)

Johannes Hörner (not in RePEc)

Score contribution per author:

8.043 = (α=2.01 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

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)

Technical Details

RePEc Handle
repec:aea:aecrev:v:92:y:2002:i:3:p:644-663
Journal Field
General
Author Count
1
Added to Database
2026-02-02