Reputation
Being thought likely to behave in a particular way is worth having in itself, because others respond to the belief rather than to the act.
Often misread asTreating reputation as a record of past behaviour, so it is assumed to be built by doing good things repeatedly and to be worth having for its own sake.
How to see it
Being believed because you might be the sort who means it
Reputation works when other people are unsure what kind of player you are. If there is some chance you are the sort who always fights, or always repays, then behaving that way keeps that possibility alive and changes how others treat you. The asset is their uncertainty about you, and one act out of character can destroy it.
The checkReputation is what others think you might be; the past counts only in so far as it is evidence about that.
Try itIn the chain store game, ask why fighting the first entrant can pay even though fighting is unprofitable in itself. If your answer is about later entrants' beliefs rather than about this entrant, you have it.
Games that show it
Know these first
Easily confused with
Sources
- Kreps, D. & Wilson, R. (1982). Journal of Economic Theory 27(2), 253-279.
- Milgrom, P. & Roberts, J. (1982). Journal of Economic Theory 27(2), 280-312.
- Mailath, G. & Samuelson, L. (2006). Oxford University Press.