Collective Reputation, Professional Regulation and Franchising

38 Pages Posted: 17 Sep 2007

See all articles by Robert Andrew Evans

Robert Andrew Evans

University of Cambridge - Faculty of Economics and Politics

Timothy W. Guinnane

Yale University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 2007

Abstract

Collective reputation and its associated free-rider problem have been invoked to justify state licensing of professions and to explain the incidence of franchising. We examine the conditions under which it is possible to create a Pareto-improving collective reputation among groups of heterogeneous producers. If the regulator or franchisor cannot credibly commit to high quality then a common reputation can be created only if the groups are not too different and if marginal cost is declining. High cost groups benefit most from forming a common regime.

Keywords: Quality regulation, Licensing, Collective reputation, Reputational externality, Franchising

JEL Classification: L43, L44

Suggested Citation

Evans, Robert Andrew and Guinnane, Timothy W., Collective Reputation, Professional Regulation and Franchising (September 2007). Cowles Foundation Discussion Paper No. 1627, Available at SSRN: https://ssrn.com/abstract=1015104

Robert Andrew Evans

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

Timothy W. Guinnane (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
(203) 432-3616 (Phone)
(203) 432-3898 (Fax)

HOME PAGE: http://sites.google.com/site/timothywguinnanec/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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