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Honest Equilibria in Reputation Games: The Role of Time Preferences

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  • Melis Kartal

Abstract

New relationships are often plagued with uncertainty because one of the players has some private information about her "type." The reputation literature has shown that equilibria that reveal this private information typically involve breach of trust and conflict. But are these inevitable for equilibrium learning? I analyze self-enforcing relationships where one party is privately informed about her time preferences. I show that there always exist honest reputation equilibria, which fully reveal information and support cooperation without breach or conflict. I compare these to dishonest reputation equilibria from several perspectives. My results are applicable to a broad class of repeated games.

Suggested Citation

  • Melis Kartal, 2018. "Honest Equilibria in Reputation Games: The Role of Time Preferences," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 278-314, February.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:1:p:278-314
    Note: DOI: 10.1257/mic.20160178
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    Citations

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    Cited by:

    1. Janas, Moritz & Oljemark, Emilia, 2021. "Trust and reputation under asymmetric information," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 97-124.
    2. Giacomo Calzolari & Leonardo Felli & Johannes Koenen & Giancarlo Spagnolo & Konrad O. Stahl, 2019. "Trust, investment and competition: theory and evidence from German car manufacturers," CESifo Working Paper Series 7680, CESifo.
    3. Kartal, Melis & Müller, Wieland & Tremewan, James, 2021. "Building trust: The costs and benefits of gradualism," Games and Economic Behavior, Elsevier, vol. 130(C), pages 258-275.
    4. Giacomo Calzolari & Leonardo Felli & Johannes Koenen & Giancarlo Spagnolo & Konrad O. Stahl, 2024. "Trust and Complexity in Vertical Relationships," CESifo Working Paper Series 11170, CESifo.
    5. Simon Martin & Karl H. Schlag, 2017. "Finite Horizon Holdup and How to Cross the River," Vienna Economics Papers vie1706, University of Vienna, Department of Economics.
    6. Martin, Simon & Schlag, Karl, 2017. "Finite Horizon Holdup and How to Cross the River," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168136, Verein für Socialpolitik / German Economic Association.
    7. Giacomo Calzolari & Leonardo Felli & Johannes Koenen & Giancarlo Spagnolo & Konrad Stahl, 2024. "Trust in Vertical Relations," CRC TR 224 Discussion Paper Series crctr224_2024_530, University of Bonn and University of Mannheim, Germany.
    8. Giacomo Calzolari & Leonardo Felli & Johannes Koenen & Giancarlo Spagnolo & Konrad O. Stahl, 2021. "Relational Contracts and Trust in a High-Tech Industry," CRC TR 224 Discussion Paper Series crctr224_2021_316, University of Bonn and University of Mannheim, Germany.
    9. Janas, Moritz & Oljemark, Emilia, 2020. "Trust and Reputation under Asymmetric Information," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224518, Verein für Socialpolitik / German Economic Association.

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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