Consumer Networks and Firm Reputation: A First Experimental Investigation

TY - UNPB

T1 - Consumer Networks and Firm Reputation

T2 - A First Experimental Investigation

AU - Huck, Steffen

AU - Lünser, Gabriele K.

AU - Tyran, Jean-Robert

N1 - JEL Classification: C72, C92, D40, L14

PY - 2007

Y1 - 2007

N2 - Arguing that consumers are the carriers of firms' reputations, we examine the role of consumer networks for trust in markets that suffer from moral hazard. When consumers are embedded in a network, they can exchange information with their neighbours about their private experiences with different sellers. We find that such information exchange fosters firms' incentives for reputation building and, thus, enhances trust and efficiency in markets. This efficiency-enhancing effect is already achieved with a rather low level of network density

AB - Arguing that consumers are the carriers of firms' reputations, we examine the role of consumer networks for trust in markets that suffer from moral hazard. When consumers are embedded in a network, they can exchange information with their neighbours about their private experiences with different sellers. We find that such information exchange fosters firms' incentives for reputation building and, thus, enhances trust and efficiency in markets. This efficiency-enhancing effect is already achieved with a rather low level of network density

KW - Faculty of Social Sciences

KW - trust

KW - consumer economics

KW - moral hazard

KW - information conditions

KW - reputation

M3 - Working paper

BT - Consumer Networks and Firm Reputation

PB - Department of Economics, University of Copenhagen

ER -