Reputation and Product Quality

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.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 250 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.