Observability and Sorting in a Market for Names
38 Pages Posted: 10 Aug 2008
Date Written: August 2007
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: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
By Gunther Lang
By Tianxi Wang