Reputation and Strategic Adoption
نویسنده
چکیده
I develop a continuous-time model of reputation in which a privatelyinformed seller, such as a startup, tries to court a forward-looking buyer, such as a venture capitalist (VC). The VC learns gradually about the startup’s quality, high or low, through exogenous news and can adopt at any time. The startup can exit or privately upgrade its quality at any time. I discover two novel kinds of reputational dynamics in equilibrium: a resetting barrier, where low types upgrade at low states inducing discrete upward jumps in reputation, and skew Brownian motion, where low types exit continuously at intermediate states, creating a permeable barrier for reputation. Contrary to the classic lemons result, the VC prefers this private information environment to one with symmetric information. The rich strategic interaction between the startup and VC implies, somewhat surprisingly, that players may benefit from increases in their own cost parameters. Other applications of the model include political lobbying, dating, job search and higher education.
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تاریخ انتشار 2015