The role of communication content and reputation in the choice of transaction partners

We study the effects of communication content and its interaction with reputation on the choice of transaction partners in markets with moral hazard. We find that buyers' choices of sellers are influenced by prices and reputation information as well as by sellers' messages: buyers prefer s...

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Bibliographic Details
Published inGames and economic behavior Vol. 112; pp. 49 - 66
Main Authors Brosig-Koch, Jeannette, Heinrich, Timo
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.11.2018
Subjects
Communication
Moral hazard
Procurement auctions
Promises
Reputation
Social distance
Social distance
D44
Promises
Reputation
Procurement auctions
D83
L14
Communication
Moral hazard
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Summary:We study the effects of communication content and its interaction with reputation on the choice of transaction partners in markets with moral hazard. We find that buyers' choices of sellers are influenced by prices and reputation information as well as by sellers' messages: buyers prefer sellers who make specific promises. If specific promises are infeasible, buyers prefer sellers whose arguments reduce the social distance. These observations do not depend on the availability of reputation information. We also find that, if specific promises are feasible, buyers' profits do not significantly differ from hypothetical profits realized under a correct expectations rule.
ISSN:0899-8256
1090-2473
DOI:10.1016/j.geb.2018.07.004