A survey of the economic theory of reputation: its logic and limits

This article, which explores how economists model a firm's reputation, elaborates the standard economic framework for investigating the corporate reputation. The firm has a reputation with specific stakeholders regarding specific characteristics. Any theory of reputation has to develop some theory of belief revision, that is, how firm actions revise stakeholders' beliefs, and then explain how these belief revisions influence the stakeholders' treatment of the firm. The reputation framework predicts opportunistic actions around adverse turning points in firms' histories, when firms realise, but stakeholders do not, that the long-run profits from reputation formation are no longer sufficient to support reputation-forming behaviour. It then shows that economics has dealt many possible reputable characteristics and stakeholders. An interesting avenue for future research would be to cover the boundaries of the economic reputation model to include repair, both superficial and substantive, perhaps following the approaches presented