Reputation and competition with social convention

Alessandro Fedele; Piero Tedeschi

Reputation and competition with social convention

Alessandro Fedele Piero Tedeschi

2011

https://hdl.handle.net/10863/52350

Reputation

Pure hidden action

Bertrand competition

Social convention

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.

: Reputation and competition with social convention
: Alessandro Fedele
Piero Tedeschi
: (UNIBZ)1431800
991006786485201241
: Faculty of Economics and Management
: English
: Working paper
: Fedele A, Tedeschi P
: description: Working Paper 1105, Department of Economics, University of Brescia