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Optimal Regulation in the Presence of Reputation Concerns / Andrew Atkeson, Christian Hellwig, Guillermo Ordonez.
- Format:
- Book
- Author/Creator:
- Atkeson, Andrew.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w17898.
- NBER working paper series no. w17898
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- We study a market with free entry and exit of firms who can produce high-quality output by making a costly but efficient initial unobservable investment. If no learning about this investment occurs, an extreme "lemons problem" develops, no firm invests, and the market shuts down. Learning introduces reputation incentives such that a fraction of entrants do invest. If the market operates with spot prices, simple regulation can enhance the role of reputation to induce investment, thus mitigating the "lemons problem" and improving welfare.
- Notes:
- Print version record
- March 2012.
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