Bar-Isaac, Heski
(2004)
Reputation and professional services: Survival, teams and incentives.
PhD thesis, London School of Economics and Political Science.
Abstract
Following the opening chapter, which surveys existing literature on the issue of the interaction between individual and group reputation, the remaining chapters each address a simple question to better understand how reputation affects outcomes and incentives. Specifically: Even though good and bad luck might affect short term reputations, do agents end up with the reputations that they deserve, that is one that reflects their genuine underlying ability. The central result of Chapter 2 is that, if the agent knows her own ability (though customers can only make inferences by observing history) then eventually the truth will out. How can an agent, who has proven her ability, commit to working hard. Once an agent has established a reputation then it is a tautology to say that she has no reputational concern. However, if effort is efficient she may want to commit to exerting effort and get adequately rewarded. Chapter 3 shows that one way that she may be able to do this is by hiring and working with a junior agent of uncertain ability. Do teams care any more or less about their reputations than individuals. Joint work with Juanjo Ganuza and introduced in Chapter 4 suggests that an important aspect in answering this question would be to determine whether an agent or team's reputational concerns are primarily about a concern to show itself to be excellent and capable in every task, or about a concern to avoid customers thinking that it is inept. How does industry structure affect a firm's ability to commit to producing high quality. The final chapter discusses this question and suggests that a number of different effects are in play so that there is no simple answer.
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