Promoting a Reputation for Quality
Autor: | Daniel N. Hauser |
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Rok vydání: | 2016 |
Předmět: |
History
Polymers and Plastics media_common.quotation_subject ComputingMilieux_LEGALASPECTSOFCOMPUTING Information design Investment (macroeconomics) Industrial and Manufacturing Engineering Product (business) Incentive Promotion (rank) Order (exchange) Quality (business) Business Business and International Management Marketing Industrial organization media_common Reputation |
Zdroj: | SSRN Electronic Journal. |
ISSN: | 1556-5068 |
DOI: | 10.2139/ssrn.2845375 |
Popis: | A firm builds its reputation not only by investing in the quality of its products, but also by controlling the information consumers can see. I consider a model in which a firm invests in both product quality and in a costly signaling technology in order to build its reputation, the market's belief that its quality is high. The firm influences the rate at which consumers’ receive information about quality: the firm can either promote, which increases the arrival rate of signals when quality is high, or censor, which decreases the arrival rate of signals when quality is low. I study how the firm's incentives to build quality and signal depend on its reputation and current quality. The firm's ability to promote or censor plays a key role in the structure of equilibria. Promotion and investment in quality are complements: the firm has stronger incentives to build quality when the promotion level is high. Costly promotion can, however, reduce the firm's incentive to build quality; this effect persists even as the cost of building quality approaches zero. Censorship and investment in quality are substitutes. The ability to censor can destroy a firm's incentives to invest in quality, because it can reduce information about poor quality products. |
Databáze: | OpenAIRE |
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