What's in a Name? Reputation as a Tradeable Asset
Tadelis, Steven. 1999. "What's in a Name? Reputation as a Tradeable Asset."
American Economic Review,
The author develops a model in which a firm's only asset is its name, which summarizes its reputation, and studies the forces that cause names to be valuable, tradable assets. An adverse selection model in which shifts of ownership are not observable guarantees an active market for names with either finite or infinite horizons. No equilibrium exists in which only good types buy good names. The reputational dynamics that emerge from the model are more realistic than those in standard game-theoretic reputation models and suggest that adverse selection plays a crucial role in understanding firm reputation.
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Tadelis, Steven (Stanford U)
L14: Transactional Relationships; Contracts and Reputation; Networks
M21: Business Economics