New, Like New, or Very Good? Reputation and Credibility

Résumé

We show that sellers may earn reputation for their \ability" to deliver high quality goods on average by honestly announcing the realised quality of items for sale every period. As the expected revenue stream from continuing with honest communication increases with their ability, high ability sellers remain honest while low ability sellers find it too costly and sometimes lie about quality for short-term gain. Thus, cheap-talk communication facilitates the market's learning of a seller's ability and strengthens reputation effects. We study this new reputation mechanism and the induced market dynamics, first when sellers cannot restart with a new identity and then when they can. We extend the analysis to various other situations such as voluntary refund and moral hazard.

Codes JEL

Remplacé par

Bruno Jullien et In-Uck Park, « New, Like New, or Very Good? Reputation and Credibility », The Review of Economic Studies, vol. 81, n° 4, mars 2014, p. 1543–1574.

Référence

Bruno Jullien et In-Uck Park, « New, Like New, or Very Good? Reputation and Credibility », TSE Working Paper, n° 09-086, juillet 2009, révision 29 janvier 2014.