Incentives and Reputation when Names can be Replaced: Valjean Reinvented as Monsieur Madeleine

• Bernardita Vial ^[1] ; Felipe Zurita
  1. [1] Pontificia Universidad Católica de Chile

     Pontificia Universidad Católica de Chile

     Santiago, Chile

     
• Localización: Documentos de Trabajo ( Instituto de Economía PUC ), ISSN-e 0717-7593, Nº. 443, 2013, págs. 1-14
• Idioma: inglés
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• Resumen

  • This article studies the effect of the possibility that firms change their names over their incentives for choosing high quality. A firm may want to start over under a new name in order to avoid market punishment, if the reputation carried by its former name is too low. We find that that the effect of the name-changing option on incentives is ambiguous. Although the ability of avoiding punishment generally hurts incentives, it may sometimes improve them. Moreover, doing so may be the only way out a low-effort trap. The conditions under which each case obtains are explored.