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Title: Consumer Networks and Firm Reputation: A First Experimental Investigation

Author(s): Steffen Huck, Gabriele Lünser and Jean-Robert Tyran

Publication Date: January 2008

Keyword(s): consumer network, information conditions, moral hazard, reputation and trust

Programme Area(s): Industrial Organization

Abstract: Arguing that consumers are the carriers of firms? reputations, we examine the role of consumer networks for trust in markets that suffer from moral hazard. When consumers are embedded in a network, they can exchange information with their neighbours about their private experiences with different sellers. We find that such information exchange fosters firms' incentives for reputation building and, thus, enhances trust and efficiency in markets. This efficiency-enhancing effect is already achieved with a rather low level of network density.

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Bibliographic Reference

Huck, S, Lünser, G and Tyran, J. 2008. 'Consumer Networks and Firm Reputation: A First Experimental Investigation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6624