Abstract
In this note we develop a pure hidden action model of reputation and repeated Bertrand competition,
where firms are homogeneous, entry is free, and consumers infer future non-contractible
quality both from information about past quality and from current prices. We show that a positive
level of quality is sustained as an outcome of a stationary equilibrium, together with a
social convention about the minimum acceptable quality. If instead the social convention is not
relevant, more entry occurs at the cost of worse quality and lower consumer welfare.
Keywords: reputation, pure hidden action, Bertrand competition, social convention
Lingua originale | English |
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Editore | IELI |
Numero di pagine | 9 |
Stato di pubblicazione | Pubblicato - 2011 |
Keywords
- Reputation
- insurance
- quality
- social convention