The Empirical Content of Reputation Effects

Speaker: Dr Allen Vong

Affiliation: National University of Singapore

Location: Room 325, Therapies Building (#85A), St Lucia Campus

Zoom: https://uqz.zoom.us/j/82603079317

Abstract: I revisit the classic reputation model, in which a long-lived player, either strategic or committed to a fixed action distribution, faces a sequence of short-lived players. I show that canonical reputation effects are fragile to the short-lived players’ misspecification of signals generated by the commitment type: misspecification can vanish on every fixed finite horizon yet leave the patient strategic type’s highest equilibrium payoff at most the complete-information benchmark. More generally, every subjective commitment-type signal process is arbitrarily close, in its distribution of histories over any fixed finite horizon, to both processes inducing collapse of the reputation effect and processes preserving it. Thus, evidence from any fixed finite horizon cannot robustly determine whether reputation effects survive.