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Proposition 6: Names with a history consisting of only one success and no failures must be traded in all equilibria.
Tadelis (2001) - The Market For Reputations As An Incentive Mechanism (view source)
Revision as of 21:05, 28 April 2010
, 21:05, 28 April 2010→Longer Horizon and Sorting
The paper goes on to discuss longer horizons and sorting. The derivations will not be discussed here but the following propositions are provided:
'''Proposition 6''': Names with a history consisting of only one success and no failures must be traded in all equilibria. '''Proposition 7''': For the infinite horizon model there is no equilibrium in which only <math>S\,</math> names are traded, and these are bought only by good types and by opportunistic types who choose to be good.
This sorting result is important. Suppose it were true, then it would affect beliefs - Observing an <math>S\,</math> name would lead to the inference that it is held by a good (or good opportunistic) type. Then an <math>S\,</math> name would command a premium, and <math>O\,</math> types would value it higher because they face a less attractive future without it.
