Premium
OBSERVABLE REPUTATION TRADING *
Author(s) -
Hakenes Hendrik,
Peitz Martin
Publication year - 2007
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2007.00442.x
Subject(s) - reputation , business , asset (computer security) , value (mathematics) , intangible asset , quality (philosophy) , service (business) , market share , microeconomics , industrial organization , marketing , commerce , economics , finance , philosophy , computer security , epistemology , machine learning , sociology , computer science , social science
Is the reputation of a firm tradable when the change in ownership is observable? We consider a competitive market in which a share of owners must retire in each period. New owners bid for the firms that are for sale. Customers learn the owner's type, which reflects the quality of the good or service provided, through experience. After observing an ownership change they may want to switch firms. However, in equilibrium, good new owners buy from good old owners and retain high‐value customers. Hence reputation is a tradable intangible asset, although ownership change is observable.