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Publication

The Dynamics of Collective Reputation

I present a stochastic version of Tirole's (1996) collective reputation model. In equilibrium, group behavior is persistent due to a complementarity between the group's reputation, which depends on the past behavior of the group's members, and current incentives. A group can maintain a strong reputation even as conditions become unfavorable, while an improvement in the environment may not help a group with a poor reputation. I also connect the model to the theory of statistical discrimination and show that the same mechanism can explain why discrimination might persist over time.

Author(s)
Jonathan Levin
Publication Date
February, 2009