Observability and Sorting in a Market for Names

38 Pages Posted: 10 Aug 2008

See all articles by Joyee Deb

Joyee Deb

Leonard N. Stern School of Business - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2007

Abstract

Can firm names be tradeable assets when changes in name ownership are observable? Earlier literature suggests that non-observability is critical to sustaining name trading. Yet, casual empiricism suggests that shifts in name ownership may be publicly known. This paper shows how firm names can be traded even under full observability. In equilibrium, even when consumers see a reputed name being divested they continue trusting it and so, these names are tradeable. I also demonstrate an appealing sorting property of the equilibria. Competent firms separate themselves by buying valuable names, or incompetent firms give themselves away by using worthless names.

Suggested Citation

Deb, Joyee, Observability and Sorting in a Market for Names (August 2007). Available at SSRN: https://ssrn.com/abstract=1213091 or http://dx.doi.org/10.2139/ssrn.1213091

Joyee Deb (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

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