Tradable Reputation

33 Pages Posted: 23 Jan 2009

See all articles by Hong Xu

Hong Xu

University of Texas at Austin - Department of Information, Risk, and Operations Management

Jianqing Chen

The University of Texas at Dallas, Jindal School of Management

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management

Date Written: January 21, 2009

Abstract

We examine a reputation market in an infinite repeated game setting, where agents operate firms and trade firms' reputations. Agents exert effort to produce homogeneous products, which ex post may be of different qualities. High-type agents have a lower cost of effort than low types. An auditor performs random checks on products and determines agents' reputations. Our analysis depicts a full equilibrium in the reputation system with audit, including separating, partial separating, and pooling equilibrium under different conditions. In particular, we show that in separation, agents' types can be sorted by their reputations, which is in contrast to Tadelis (2002).

JEL Classification: D40, D86, M20, M42

Suggested Citation

Xu, Hong and Chen, Jianqing and Whinston, Andrew B., Tradable Reputation (January 21, 2009). Available at SSRN: https://ssrn.com/abstract=1331076 or http://dx.doi.org/10.2139/ssrn.1331076

Hong Xu (Contact Author)

University of Texas at Austin - Department of Information, Risk, and Operations Management ( email )

2317 Speedway
Austin, TX 78712
United States

Jianqing Chen

The University of Texas at Dallas, Jindal School of Management ( email )

800 West Campbell Road
Richardson, TX 75080
United States

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
512-471-8879 (Phone)

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