Consumer Networks and Firm Reputation: A First Experimental Investigation

15 Pages Posted: 5 Jun 2008

See all articles by Steffen Huck

Steffen Huck

University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Gabriele K. Lünser

University College London - Centre for Economic Learning and Social Evolution (ELSE)

Jean-Robert Tyran

University of Vienna; University of Copenhagen - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: January 2008

Abstract

Arguing that consumers are the carriers of firms' reputations, we examine the role of consumer networks for trust in markets that suffer from moral hazard. When consumers are embedded in a network, they can exchange information with their neighbours about their private experiences with different sellers. We find that such information exchange fosters firms' incentives for reputation building and, thus, enhances trust and efficiency in markets. This efficiency-enhancing effect is already achieved with a rather low level of network density.

Keywords: Consumer network, information conditions, moral hazard, reputation, trust

JEL Classification: C72, C92, D40, L14

Suggested Citation

Huck, Steffen and Lünser, Gabriele K. and Tyran, Jean-Robert, Consumer Networks and Firm Reputation: A First Experimental Investigation (January 2008). , Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1140553

Steffen Huck (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 207 679 5895 (Phone)
+44 207 916 2774 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctpshu/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gabriele K. Lünser

University College London - Centre for Economic Learning and Social Evolution (ELSE) ( email )

Gower Street
London WC1E 6BT
United Kingdom

Jean-Robert Tyran

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/jean-robert.tyran/

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+45 353 23 027 (Phone)

HOME PAGE: http://www.econ.ku.dk/tyran/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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