Asymmetry of Reputation Loss and Recovery under Endogenous Partnerships: Theory and Evidence

44 Pages Posted: 24 Jan 2010 Last revised: 10 Sep 2014

See all articles by Takako Fujiwara-Greve

Takako Fujiwara-Greve

Keio University - Faculty of Economics

Henrich R. Greve

INSEAD

Stefan Jonsson

Uppsala University - Department of Business Studies

Date Written: September 9, 2014

Abstract

This paper is inspired by real-world phenomena that firms lose customers based on imprecise information and take a long time to recover. If consumers are playing an ordinary repeated game with fixed partners, there is no clear reason why recovery slowly happens. However, if consumers are playing an endogenously repeated game, a class of simple efficient equilibria exhibits the asymmetry of fast loss of customers after a bad signal and slow recovery. Exit is systematic but formation of a new partnership is random. We also give empirical evidence of our equilibria at an individual-firm level.

Keywords: dynamic asymmetry, imperfect monitoring, trust game, endogenous relationships

JEL Classification: C73, D82

Suggested Citation

Fujiwara-Greve, Takako and Greve, Henrich R. and Jonsson, Stefan Johan, Asymmetry of Reputation Loss and Recovery under Endogenous Partnerships: Theory and Evidence (September 9, 2014). Available at SSRN: https://ssrn.com/abstract=1541483 or http://dx.doi.org/10.2139/ssrn.1541483

Takako Fujiwara-Greve (Contact Author)

Keio University - Faculty of Economics ( email )

2-15-45 Mita, Ninato-ku
Tokyo 1088345
Japan

Henrich R. Greve

INSEAD ( email )

F-77305 Fontainebleau Cedex
France

Stefan Johan Jonsson

Uppsala University - Department of Business Studies ( email )

Box 513
SE 751 20 Uppsala
Sweden

HOME PAGE: http://www.fek.uu.se/institutionen/person.asp?PersonId=485&lang=e

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