Reputations in Repeated Games

Mailath, George J.; Samuelson, Larry

doi:10.2139/ssrn.2286763

Cited by 8 publications

(2 citation statements)

References 43 publications

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“…The model here differs from the cheap talk setup in that the bias of the sender determines the sender's payoff, but the sender's action can be only imperfectly monitored. The model relates broadly to the literature on reputation as trust in a repeated game, as described by Cabral (2005) and Mailath and Samuelson (2015). These models of reputation in environments with monetary transactions go back at least to Klein and Leffler (1981).…”

Section: Introductionmentioning

confidence: 98%

Free ad(vice): internet influencers and disclosure regulation

Mitchell

2021

The RAND J of Economics

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Consumers rely on intermediaries ("influencers") such as social media recommendations to provide information about products. The advice may be mixed with endorsement in a way that is unobservable to the follower, creating a trade-off for influencers between the best advice and the most revenue. This article models the dynamic relationship between an influencer and a follower. The relationship evolves between periods of less and more revenue. The model can provide insight into policies such as the Federal Trade Commission's mandatory disclosure rules. An opt-in policy may be superior: it deregulates influencers who are reaping the rewards of past good advice.

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Section: Introductionmentioning

confidence: 98%

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Mitchell

2021

The RAND J of Economics

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“…HolmstrÖm (1999) studies a model of career concerns in which the agent's type is unknown to all players but the agent has incentives to manage other players' beliefs about her type. See Mailath and Samuelson (2014) for a survey of recent work in this area. 6 See also Bohren (2014), Dilme (2018), Hauser (2017), and Marinovic, Skrzypacz, and Varas (2018). exert only low effort in each period, or competent, that is, can exert high or low effort in each period.…”

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confidence: 99%

Star Ratings and the Incentives of Mutual Funds

Huang¹,

Li²,

Wang

2020

The Journal of Finance

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We propose a theory of reputation to explain how investors rationally respond to mutual fund star ratings. A fund's performance is determined by its information advantage, which can be acquired but decays stochastically. Investors form beliefs about whether the fund is informed based on its past performance. We refer to such beliefs as fund reputation, which determines fund flows. As performance changes continuously, equilibrium fund reputation may take discrete values only and thus can be labeled with stars. Star upgrades thus imply reputation jumps, leading to discrete increases in flows and expected performance, although stars do not provide new information.MUTUAL FUND FLOWS ARE CLOSELY associated with fund star ratings. Analyzing Morningstar ratings, Del Guercio and Tkac (2008) show that when a fund is upgraded from the four-star group to the five-star group, on average, it observes positive abnormal flows of 53% to 61%. 1 Reuter and Zitzewitz (2015) further find that bottom five-star funds tend to receive significantly more

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Quality and Pricing Decisions in a Market with Consumer Information Sharing

2019

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We provide a dynamic, game-theoretic model to examine a firm’s quality and pricing decisions for its new experience goods. Early consumers do not observe product quality prior to purchase but can learn it after purchase and share that product-quality information with later consumers—for example, through online reviews. Both the firm’s quality decision and its cost efficiency are the firm’s private information and not directly observed by the consumer. The early consumers can make a rational inference from the firm’s price about its cost and quality taking into account the firm’s profit incentive from the later informed consumers. We find that in equilibrium a more cost-efficient firm chooses higher quality than does an inefficient firm. One might intuit that a firm will offer higher quality if its high efficiency is known to consumers than if its efficiency is not known, because it will no longer need to convince consumers that it is not the inefficient firm. Our analysis shows that, surprisingly, the opposite may be true—when a firm’s high efficiency is publicly known, the firm may reduce its product quality rather than increase it. Furthermore, consumers’ knowledge about the firm’s cost efficiency can reduce the consumer surplus. We also show that an improvement in the average cost efficiency in the market can lower the consumer surplus. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2930 . This paper was accepted by J. Miguel Villas-Boas, marketing.

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Reputations in Repeated Games

Cited by 8 publications

References 43 publications

Free ad(vice): internet influencers and disclosure regulation

Free ad(vice): internet influencers and disclosure regulation

Star Ratings and the Incentives of Mutual Funds

Quality and Pricing Decisions in a Market with Consumer Information Sharing

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