‘The Dark Side of Reputation’

“Private ordering theorists put a great deal of weight on reputation to enforce honest behavior among market participants. They assume that the fear of getting a bad reputation and consequently being shut out of opportunities to trade, particularly within a network of repeat players, incentivizes potential cheaters to act honestly. While this model has proven enduring and important, it lacks nuance. Opportunistically inclined people can, and will, simply falsify reputation signals and thereby get the best of both worlds: a good reputation and the gains from their opportunism. In a recent article, The Dark Side of Reputation, I study this limitation on the governing power of reputation …” (more)

[Emily Kadens, Oxford Business Law Blog, 8 October]

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