Reputational Externality and Self-Regulation
Guinnane, Timothy W.
Cambridge Working Papers in Economics
Faculty of Economics
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Evans, R., & Guinnane, T. W. (2006). Reputational Externality and Self-Regulation. https://doi.org/10.17863/CAM.5069
Professional associations and other producer groups often complain that their reputation is damaged by other groups providing a similar but lower-quality service and that the latter should be regulated. We examine the conditions under which a common regulatory regime can induce Pareto-improvements by creating a common reputation for quality among heterogeneous producers, when the regulator cannot commit to a given quality. A common reputation can be created only if the groups are not too different and if marginal cost is declining. High cost groups and small groups benefit most from forming a common regime.
Quality Regulation, Licensing, Collective Reputation, Reputational Externality
This record's DOI: https://doi.org/10.17863/CAM.5069
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