The Kreps-Wilson-Milgrom-Roberts framework is one of the most renowned ways of modelling reputation-building. Once the number of repetitions of the game is considered as a choice variable, such a framework can fruitfully be employed to study the optimal length of a commitment to a relationship. We analyze a model where a principal plays with an agent a finitely repeated trust game, characterize the optimal length of the relationship between principal and agent when the principal's preferences on the agent's type stochastically change over time and show that a commitment to a stable relationship may be optimal (even) in very unstable environments.

Colombo, F., Merzoni, G. S., For how long to tie your hands? Stable relationships in an unstable environment, <<JOURNAL OF ECONOMICS>>, 2008; 95 (2): 93-120. [doi:10.1007/s00712-008-0029-8] [http://hdl.handle.net/10807/11507]

For how long to tie your hands? Stable relationships in an unstable environment

Colombo, Ferdinando;Merzoni, Guido Stefano
2008

Abstract

The Kreps-Wilson-Milgrom-Roberts framework is one of the most renowned ways of modelling reputation-building. Once the number of repetitions of the game is considered as a choice variable, such a framework can fruitfully be employed to study the optimal length of a commitment to a relationship. We analyze a model where a principal plays with an agent a finitely repeated trust game, characterize the optimal length of the relationship between principal and agent when the principal's preferences on the agent's type stochastically change over time and show that a commitment to a stable relationship may be optimal (even) in very unstable environments.
2008
Inglese
Colombo, F., Merzoni, G. S., For how long to tie your hands? Stable relationships in an unstable environment, <<JOURNAL OF ECONOMICS>>, 2008; 95 (2): 93-120. [doi:10.1007/s00712-008-0029-8] [http://hdl.handle.net/10807/11507]
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/11507
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 3
  • ???jsp.display-item.citation.isi??? 2
social impact