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Innovation and Reputation

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  • Miller, Robert A

Abstract

This paper analyzes a monopolist that markets successive generations of new and improving nondurable products. Prices, research intensity, and product innovations are derived as sequential equilibrium outcomes to a dynamic game with incomplete information. Asymmetric information is an important feature of the model. The monopolist is fully aware of the current product's quality, as are consumers who have tried it. However, the beliefs of other people are characterized by a probability distribution that depends on the monopolist's marketing strategy and the product's popularity. The analysis illustrates a new context in which price signaling might serve as a mechanism for ensuring that only high- quality products are marketed. Copyright 1988 by University of Chicago Press.

Suggested Citation

  • Miller, Robert A, 1988. "Innovation and Reputation," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 741-765, August.
    • Handle: RePEc:ucp:jpolec:v:96:y:1988:i:4:p:741-65
    DOI: 10.1086/261561
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    Cited by:

    1. K. Chau & S. Wong & C. Yiu, 2007. "Housing Quality in the Forward Contracts Market," The Journal of Real Estate Finance and Economics, Springer, vol. 34(3), pages 313-325, April.
    2. Thams, Yannick & Alvarado-Vargas, Marcelo J. & Newburry, William, 2016. "Geographical diversification as a predictor of MNC reputations in their home nations," Journal of Business Research, Elsevier, vol. 69(8), pages 2882-2889.
    3. Baojun Jiang & Bicheng Yang, 2019. "Quality and Pricing Decisions in a Market with Consumer Information Sharing," Management Science, INFORMS, vol. 65(1), pages 272-285, January.
    4. Barton H. Hamilton & Andrés Hincapié & Robert A. Miller & Nicholas W. Papageorge, 2021. "Innovation And Diffusion Of Medical Treatment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 953-1009, August.
    5. Palanisamy Ganesan & Manohar Sridhar, 2016. "Service Innovation and Customer Performance of Telecommunication Service Provider: A Study on Mediation Effect of Corporate Reputation," Corporate Reputation Review, Palgrave Macmillan, vol. 19(1), pages 77-101, February.
    6. Peter W. Kennedy, 1994. "Word‐of‐Mouth Communication and Price as a Signal of Quality," The Economic Record, The Economic Society of Australia, vol. 70(211), pages 373-380, December.

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