{"title":"A Reputational Theory of Firm Dynamics","authors":"Simon Board, Moritz Meyer-ter-Vehn","doi":"10.1257/mic.20190376","DOIUrl":null,"url":null,"abstract":"We study the life cycle of a firm that produces a good of unknown quality. The firm manages its quality by investing while consumers learn via public breakthroughs; if the firm fails to generate such breakthroughs, its revenue falls and it eventually exits. Optimal investment depends on the firm’s reputation (the market’s belief about its quality) and self-esteem (the firm’s own belief about its quality), and is single-peaked in the time since a breakthrough. We derive predictions about the distribution of revenue and propose a method to decompose the impact of policy changes into investment and selection effects. (JEL D11, D21, D25, D83, G31, L15)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.2000,"publicationDate":"2022-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"8","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"American Economic Journal-Microeconomics","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1257/mic.20190376","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 8
Abstract
We study the life cycle of a firm that produces a good of unknown quality. The firm manages its quality by investing while consumers learn via public breakthroughs; if the firm fails to generate such breakthroughs, its revenue falls and it eventually exits. Optimal investment depends on the firm’s reputation (the market’s belief about its quality) and self-esteem (the firm’s own belief about its quality), and is single-peaked in the time since a breakthrough. We derive predictions about the distribution of revenue and propose a method to decompose the impact of policy changes into investment and selection effects. (JEL D11, D21, D25, D83, G31, L15)
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