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Reputation and product quality

Rogerson, William P. (1983) Reputation and product quality. Bell Journal of Economics, 14 (2). pp. 508-516. ISSN 0361-915X. https://resolver.caltech.edu/CaltechAUTHORS:20171120-131841481

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Abstract

This article considers the role that reputation plays in assuring product quality in markets where consumers can only imperfectly judge product quality even after consumption. Three conclusions are derived. First, high quality firms have more customers because they have fewer dissatisfied customers who leave and word-of-mouth advertising results in more arrivals. Second, higher fixed costs can result in a higher equilibrium level of quality. Third, the particular form that word-of-mouth advertising takes can have significant effects on the market outcome. Recommendations consisting of a report of whether the consumer intends to patronize the same firm again generate an externality that is absent when actual estimates of quality are communicated.


Item Type:Article
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http://dx.doi.org/10.2307/3003651DOIArticle
http://www.jstor.org/stable/3003651JSTORArticle
http://resolver.caltech.edu/CaltechAUTHORS:20171010-141820064Related ItemWorking Paper
Additional Information:© 1983 RAND Corporation. This work was supported by National Science Foundation Grant SES80-06654 at the Institute for Mathematical Studies in the Social Sciences, Stanford University. I would like to thank Robert Bates, Kathleen Hagerty, Alvin Klevorick, Roger Noll, Carl Shapiro, Alan Schwartz, Louis Wilde, and two anonymous referees for helpful comments and discussions. Formerly SSWP 330.
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Funding AgencyGrant Number
NSFSES80-06654
Subject Keywords:Consumer equilibrium, Consumer economics, Consumer information, Customers, Fixed costs, Consumer choice, Recommendations, Market prices, Consumer prices, Industrial output
Issue or Number:2
Record Number:CaltechAUTHORS:20171120-131841481
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20171120-131841481
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83344
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:20 Nov 2017 22:31
Last Modified:03 Oct 2019 19:05

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