Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/149584 
Year of Publication: 
2016
Series/Report no.: 
Working Paper Series No. 16-07
Publisher: 
University of Mannheim, Department of Economics, Mannheim
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 firm. The supplier's adverse-selection problem can be solved if the downstream firm has established a reputation for delivering high quality vis-à-vis the supplier. The supplier may enter the market by initially renting the downstream firm's reputation. The downstream firm may optimally source its input externally, even though sourcing internally would be better in terms of productive efficiency. Since an entrant in the downstream market may lack reputation, it may suffer 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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