SITE Working Paper Series
Reputation and Entry
(), Enrica Carbone
(), Pierluigi Conzo
() and Giancarlo Spagnolo
Abstract: This paper reports results from a laboratory experiment
exploring the relationship between reputation and entry in procurement.
There is widespread concern among regulators that favoring suppliers with
good past performance, a standard practice in private procurement, may
hinder entry by new (smaller or foreign) firms in public procurement
markets. Our results suggest that while some reputational mechanisms indeed
reduce the frequency of entry, so that the concern is warranted,
appropriately designed reputation mechanisms actually stimulate entry.
Since quality increases but not prices, our data also suggest that the
introduction of reputation may generate large welfare gains for the
Keywords: Entry; Feedback mechanisms; Governance; Incomplete contracts; Limited enforcement; Incumbency; Multidimensional competition; Participation; Past performance; Procurement; Quality; Reputation; Vendor rating; (follow links to similar papers)
JEL-Codes: H57; L14; L15; (follow links to similar papers)
50 pages, November 25, 2012
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