Firm reputation and horizontal integration

@article{Cai2006FirmRA,
  title={Firm reputation and horizontal integration},
  author={Hongbin Cai and Ichiro Obara},
  journal={The RAND Journal of Economics},
  year={2006},
  volume={40},
  pages={340-363}
}
  • H. CaiI. Obara
  • Published 1 June 2009
  • Economics, Business
  • The RAND Journal of Economics
We study effects of horizontal integration on firm reputation. In an environment where customers observe only imperfect signals about firms' effort/quality choices, firms cannot maintain reputations of high quality and earn quality premium forever. Even when firms are choosing high quality/effort, there is always a possibility that a bad signal is observed. In this case, firms must give up their quality premium, at least temporarily, as punishment. A firm's integration decision is based on the… 

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