Collective Reputation and Quality

Abstract

AbstractFirms who sell regional or specialty products often share a collective reputation based on aggregate quality. Collective reputation can be approached as a dynamic common property resource problem. We show that for an experience good without firm traceability, individual firms have the incentive to choose quality levels that are sub‐optimal for the group. These results support minimum quality standards. Trigger strategies are analyzed as an alternative solution to this problem. Finally, the implications of these results are discussed as they relate to the case study of Washington apples.