Reputation Effects Under Interdependent Values

Harry Pei*

*Corresponding author for this work

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

A patient player privately observes a persistent state and interacts with an infinite sequence of myopic uninformed players. The patient player is either a strategic type who maximizes his payoff or one of several commitment types who mechanically play the same action in every period. I focus on situations in which the uninformed player's best reply to a commitment action depends on the state and where the total probability of commitment types is sufficiently small. I show that the patient player's equilibrium payoff is bounded below his commitment payoff in some equilibria under some of his payoff functions. This is because he faces a trade-off between building his reputation for commitment and signaling favorable information about the state. When players' stage-game payoff functions are monotone-supermodular, the patient player receives high payoffs in all states and in all equilibria. Under an additional condition on the state distribution, my reputation model yields a unique prediction on the patient player's equilibrium payoff and on-path behavior.

Original languageEnglish (US)
Pages (from-to)2175-2202
Number of pages28
JournalEconometrica
Volume88
Issue number5
DOIs
StatePublished - Sep 1 2020

Keywords

  • commitment payoff
  • interdependent values
  • Reputation
  • robust behavioral prediction

ASJC Scopus subject areas

  • Economics and Econometrics

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