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Reputation Effects Under Interdependent Values
Author(s) -
Pei Harry
Publication year - 2020
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta16584
Subject(s) - stochastic game , mathematical economics , reputation , bayesian game , traveler's dilemma , monotone polygon , action (physics) , repeated game , sequence (biology) , best response , nash equilibrium , economics , mathematics , game theory , equilibrium selection , social science , physics , geometry , quantum mechanics , sociology , biology , genetics
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.