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→How might these tests be run if one had quantitative evidence?
===How might these tests be run if one had quantitative evidence? ===
A key, underpinning aspect of the model is its infinite horizon assumption. Without it, the agents have less of an incentive to be honest.
Suppose that an exogenous factor results in some agents having better opportunities than being an honest trader. If the agent knows he will leave the trading business in advance, he would have no more reason to maintain his reputation and should begin shirking until he leaves the industry.
If we had data about entries and exits to the agency business, we may be able to learn something about whether reputation is indeed driving good behavior.
===What problems might arise in this quantitative analysis?===
