Employing a procedure suggested by a simple theoretical model of auctions in which bidders and sellers have observable and heterogenous reputations for default, we examine the effect of reputation on price in a data set drawn from the online auction site eBay. Our main empirical result is that seller, but not bidder, reputation has an economically and statistically significant effect on price.JEL codes: C51, D44, D82, L86 * We thank Sam Allen for research assistance with the data. Andrew Ching and Diego Moreno provided useful thoughts on early drafts of this paper. We are grateful to two anonymous referees and the coeditor for helpful comments.
_We characterize the set of agreements that the players of a non-cooperative game may reach when they have the opportunity to communicate prior to play. We show that communication allows the players to correlate their actions. Therefore, we take the set of correlated strategies as the space of agreements. Since we consider situations where agreements are non-binding, they must not be subject to profitable self-enforcing deviations by coalitions of players. A coalition-proof equilibrium is a correlated strategy from which no coalition has an improving and self-enforcing deviation. A coalition-proof equilibrium exists when there is a correlated strategy which (i) has a support contained in the set of actions that survive the iterated elimination of strictly dominated strategies, and (H) weakly Pareto dominates every other correlated strategy whose support is contained in that set. Consequently, the unique equilibrium of a dominance solvable game is coalition-proof.
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