Optimal Regulation in the Presence of Reputation ConcernsAndrew Atkeson, Christian Hellwig, Guillermo Ordonez
NBER Working Paper No. 17898 We study a market with free entry and exit of firms who can produce high-quality output by making a costly but efficient initial unobservable investment. If no learning about this investment occurs, an extreme "lemons problem" develops, no firm invests, and the market shuts down. Learning introduces reputation incentives such that a fraction of entrants do invest. If the market operates with spot prices, simple regulation can enhance the role of reputation to induce investment, thus mitigating the "lemons problem" and improving welfare.
Acknowledgments and Disclosures Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w17898 Published: Andrew Atkeson & Christian Hellwig & Guillermo Ordoñez, 2015. "Optimal Regulation in the Presence of Reputation Concerns," The Quarterly Journal of Economics, Oxford University Press, vol. 130(1), pages 415-464. citation courtesy of Users who downloaded this paper also downloaded* these:
|

Contact Us