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Reputation for Toughness

Author

Listed:
  • Stefano Barbieri
  • Marco Serena

Abstract

We study reputation for toughness in finitely repeated contests. Players are rational (payoff-maximizing), or "tough" (always exerting an exogenous high "tough effort"). In the unique symmetric equilibrium, a rational player has strictly positive payoff only if she is monopolizing reputation. In a reputational oligopoly, a fierce war of attrition to become the reputational monopolist may yield overdissipation. In a reputational monopolist, overdissipation never happens and the monopolist mixes between a non-tough effort to cash in on her reputation today and the tough effort to boost her reputation. In our main application, criminal groups build reputation for toughness in illegal markets.

Suggested Citation

  • Stefano Barbieri & Marco Serena, 2021. "Reputation for Toughness," Working Papers tax-mpg-rps-2021-16, Max Planck Institute for Tax Law and Public Finance.
    • Handle: RePEc:mpi:wpaper:tax-mpg-rps-2021-16
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative 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

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