Bounded memory and permanent reputations

Monte, Daniel

doi:10.1016/j.jmateco.2013.06.006

Cited by 13 publications

(4 citation statements)

References 33 publications

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“…Hellman and Cover (1970) and Wilson (2014) consider a bounded memory agent that has to design the optimal memory for a two-hypothesis testing problem. Monte (2013Monte ( , 2014 studies a model in which a bounded memory player is playing a reputation game against an informed player. We study a similar problem, but under the perspective of a designer that must persuade agents to invest at the same time that she must learn.…”

Section: A Literature Reviewmentioning

confidence: 99%

Dynamic Information Design under Constrained Communication Rules

Lorecchio

Monte²

2023

American Economic Journal: Microeconomics

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An information designer wishes to persuade agents to invest in a project of unknown quality. To do so, she must induce investment and collect feedback from these investments. Motivated by data regulations and simplicity concerns, our designer faces communication constraints. These constraints hinder her without benefiting the agents: they impose an upper bound on the induced belief spread, limiting persuasion. Nevertheless, two-rating systems (direct recommendations) are the optimal design when experimentation is needed to generate information and approximate the designer’s first-best payoff for specific feedback structures. When the designer has altruistic motives, constrained rules significantly decrease welfare. (JEL D64, D82, D83)

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Section: A Literature Reviewmentioning

confidence: 99%

Dynamic Information Design under Constrained Communication Rules

Lorecchio

Monte²

2023

American Economic Journal: Microeconomics

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“…Similarly, exogenous probabilities of type changes can sustain the type uncertainty required for long-lived reputation effects (Holmström (1999), Phelan (2006)). A subsequent literature has sought other means to replenish type uncertainty, either through exogenous factors (notably, bounded memory in Liu and Skrzypacz (2010) and Monte (2010)) or endogenous mechanisms (team production and overlapping generations in Bar-Isaac (2007); limited memory as a design choice in Ekmekci (2009), and strategic choice to acquire historical observation in Liu (2011)).…”

Section: Relation To Reputation Models With Commitment Typesmentioning

confidence: 99%

(Good and Bad) Reputation for a Servant of Two Masters

Bar‐Isaac

Deb²

2014

American Economic Journal: Microeconomics

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We consider a model in which an agent takes actions to affect her reputation with two heterogeneous audiences with diverse preferences. This contrasts with standard models of reputation, which treat the audience as homogeneous. A new aspect that arises with heterogeneous audiences is that different audiences may observe outcomes commonly or separately. We show that, if all audiences commonly observe outcomes, reputation concerns are necessarily efficient-the agent's per-period payoff in the long-run is higher than in one-shot play. However, when the audiences separately observe different outcomes, the result is opposite-the agent's per-period payoff is lower than in one-shot play. Therefore, whenever possible, the agent would choose to deal with audiences commonly rather than separately. If this is not possible, the second-best solution may be to simply forego one's reputation with one of the audiences and focus entirely on the other. Our framework thus lends support to the perception that it is hard to please different diverse audiences, and it may be better to not even attempt to do so.

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“…The literature therefore has suggested several modeling assumptions that constantly replenish uncertainty: a changing environment, so that skills that once were useful become obsolete (Benabou and Laroque, 1992;Holmström, 1999;Mailath and Samuelson, 2001), hidden changes in the ownership of the firm (Tadelis, 1999(Tadelis, , 2002, or consumers with finite memory, so that they are never really sure about the firm's type (Liu, 2011;Monte, 2013). Hörner (2002) shows that the threat of losing consumers to rivals may sustain effort incentives even if uncertainty vanishes.…”

Section: Introductionmentioning

confidence: 99%

Incentives through consumer learning about tastes

Schumacher

2014

International Journal of Industrial Organization

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Bounded memory and permanent reputations

Cited by 13 publications

References 33 publications

Dynamic Information Design under Constrained Communication Rules

Dynamic Information Design under Constrained Communication Rules

(Good and Bad) Reputation for a Servant of Two Masters

Incentives through consumer learning about tastes

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