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(Good and Bad) Reputation for a Servant of Two Masters †

(Good and Bad) Reputation for a Servant of Two Masters † Abstract We present a model in which an agent takes actions to affect her reputation with two audiences with diverse preferences. This contrasts with standard reputation models that consider a homogeneous audience. A new aspect that arises is that different audiences may observe outcomes commonly or separately. We show that, if all audiences commonly observe outcomes, reputation concerns are necessarily efficient—the agent's per-period payoff in the long run is higher than in one-shot play. However, when audiences separately observe different outcomes, the result is the opposite. Therefore, the agent would prefer to deal with audiences commonly. If this is not possible, the second-best solution may be to forgo reputation with one audience and focus entirely on the other. (JEL D11, D82 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

(Good and Bad) Reputation for a Servant of Two Masters †

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Publisher
American Economic Association
Copyright
Copyright © 2014 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.6.4.293
Publisher site
See Article on Publisher Site

Abstract

Abstract We present a model in which an agent takes actions to affect her reputation with two audiences with diverse preferences. This contrasts with standard reputation models that consider a homogeneous audience. A new aspect that arises is that different audiences may observe outcomes commonly or separately. We show that, if all audiences commonly observe outcomes, reputation concerns are necessarily efficient—the agent's per-period payoff in the long run is higher than in one-shot play. However, when audiences separately observe different outcomes, the result is the opposite. Therefore, the agent would prefer to deal with audiences commonly. If this is not possible, the second-best solution may be to forgo reputation with one audience and focus entirely on the other. (JEL D11, D82 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Nov 1, 2014

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