Reputation building through costly adjustment

• 成果类型: Article
• 署名作者: Dilme, Francesc
• 署名单位: University of Bonn
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2019.03.010
• 发表日期: 2019
• 页码: 586-626
• 关键词: Reputation; adjustment costs; Endogenous types

摘要

This paper analyzes quality and reputation management in the presence of adjustment costs. A firm produces and sells experience goods over time. The firm can choose the product quality at any time, but changing it requires a costly investment. Customers learn about the product quality through a quality dependent Poisson process. We characterize reputational dynamics, showing that the arrival of news may generate jumps in both the firm's quality choice and its reputation. We characterize the set of equilibria as a function of the adjustment costs, and show that the firm can benefit from increased adjustment costs as such costs enhance the credibility of its decisions. (C) 2019 Elsevier Inc. All rights reserved.