Magnus Våge Knutsen

Knutsen, Magnus Våge (2025)

Endogenous Prices in Markets with Reputational Concerns

RAND Journal of Economics Doi: 10.1111/1756-2171.12502

I set up a dynamic experience goods model where a long-lived seller interacts with a sequence of short-lived buyers and where the seller has reputational concerns. The key innovation of the article is to endogenize prices in this framework, specifically by endowing either the seller or the buyers with the ability to post price. I show that influence over prices has a strong impact on equilibrium characteristics. If the seller posts price, equilibria will display work-shirk dynamics. If the buyers post price, however, there is always an equilibrium where the seller builds and perpetually maintains her reputation.

Heggedal, Tom-Reiel; Helland, Leif & Knutsen, Magnus Våge (2022)

The power of outside options in the presence of obstinate types

Games and Economic Behavior, 136, s. 454- 468. Doi: 10.1016/j.geb.2022.10.011 - Full text in research archive

We experimentally investigate the role of two-sided reputation-building in dynamic bargaining. In the absence of outside options, rational bargainers have an incentive to imitate obstinate types that are committed to an aggressive demand, inducing delay. Outside options remove this incentive and ensure immediate agreement whenever two rational bargainers match. Our data support the hypothesis that outside options cut down on imitation and ensure timely agreements, but only if subjects share a belief about what constitutes obstinacy. Further, we find that outside options are exercised excessively and that efficiency is no better than it is in their absence. We ascribe this result to the presence of fairness preferences in the subject pool.

Knutsen, Magnus Våge (2013)

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