- Thursday, October 15, 2020 at 4:10PM - 5:40PM
- To access the Workshop, please go to the LEO main page (https://law.yale.edu/LEO) on Thursday, Oct. 15th after 9:00 a.m.
- Open To The Yale Community
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Daniel Klerman, holder of the Edward G. Lewis Chair in Law and History at the University of Southern California Gould School of Law and Director of the Center of Law & Social Science (CLASS) and Miguel de Figueiredo '13, Associate Professor of Law and Terry J. Tondro Research Scholar at the University of Connecticut School of Law, will be presenting from their draft paper, "Reputational Economies of Scale." The abstract of the draft paper reads:
"For many years, most scholars have assumed that the strength of reputational incentives is positively correlated with firm size. Firms that sell more products or services were thought more likely to be trustworthy than those that sell less because larger firms have more to lose if consumers decide they have behaved badly. That assumption has been called into question by recent work that shows that, under the standard infinitely repeated game model of reputation, reputational economies of scale will occur only under special conditions, such as monopoly, because larger firms not only have more to lose from behaving badly, but also more to gain. This article shows that reputational economies of scale exist even when there is competition and without other special conditions, if the probability that low quality is detected is positively correlated with the quantity of the good or service sold. It also shows that reputational economies of scale exist, under some circumstances, in a finite-horizon model of reputation. Reputational economies of scale help explain why law and accounting firms can act as gatekeepers, why mass market products are more likely to be safe, why firms are less likely to exploit one-sided contracts than consumers, and why manufacturers market new products under the umbrella of established trademarks."
The complete draft paper is available here.
Yale Law School Center for the Study of Corporate Law
Law, Economics & Organization Workshop