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

Fedele, A., Tedeschi, P., Reputation and Competition with Social Convention, <<REPUTATION AND COMPETITIONWITH SOCIAL CONVENTION>>, 2011; (Novembre): 1-9 [http://hdl.handle.net/10807/31131]

Reputation and Competition with Social Convention

Tedeschi, Piero
2011

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
Inglese
Fedele, A., Tedeschi, P., Reputation and Competition with Social Convention, <<REPUTATION AND COMPETITIONWITH SOCIAL CONVENTION>>, 2011; (Novembre): 1-9 [http://hdl.handle.net/10807/31131]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10807/31131
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