Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149584
Authors: 
Choi, Jay Pil
Peitz, Martin
Year of Publication: 
2016
Series/Report no.: 
Working Paper Series 16-07
Abstract: 
This paper analyzes a mechanism through which a supplier of unknown quality can overcome its asymmetric information problem by selling via a reputable downstream …rm. The supplier’s adverse-selection problem can be solved if the downstream …rm has established a reputation for delivering high quality vis-à-vis the supplier. The supplier may enter the market by initially renting the downstream …rm’s reputation. The downstream …rm may optimally source its input externally, even though sourcing internally would be better in terms of productive e¢ ciency. Since an entrant in the downstream market may lack reputation, it may su¤er from a reputational barrier to entry arising from higher input costs.
Subjects: 
Adverse Selection
Certi fication Intermediaries
Incumbency Advantage
Experience Goods
Outsourcing
Branding
Barriers to Entry
JEL: 
D4
L12
L4
L43
L51
L52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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