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Research seminar with Professor Sonja Opper
February 8, 2013 @ 12:00 pm - 1:15 pm
Sonja Opper is the Gad Rausing Professor of International Economics and Business at Lund University. Her research interests are entrepreneurship, economic development and privatization.
“Reflexive Reputation, Networks, and Social Norms”
That reputation provides a social mechanism in explaining the rise of cooperative norms and indirect reciprocity, is well established both in game-theoretic and experimental research (Dixit 2004; Fehr 2004). However, the fact that reputation resides in networks—in the opinions and assessments of others—poses a dilemma for explaining the behavior of agents in real life situations.
The problem is informational asymmetry; it is costly, if not often impossible, for agents to know what their audiences are actually thinking about them. However, agents need not have accurate and timely information about their reputation to behave purposively in conforming to expectations of their audiences. Reputation is directed back to agents as reflexive reputation when agents self-assess what others probably expect from them. It is thus a form of reputation that resides in the mind of agents, and not in the multiplex networks that comprise an agent’s audiences. Because reflexive reputation functions as social capital, promising either monetary or subjective payoffs, agents consider the future cost of action as they self-assess the effect of their behavior on their reputation.
We examine the link between reflexive reputation and the rise of cooperative norms using a stratified random sample of 700 entrepreneurs we surveyed in 2009 in seven metropolitan areas in the Yangzi delta region in China. Our survey instrument asked respondents what they think others expect from them, which we treated as agent’s self-appraisal of the reputational effect of their action. We find that entrepreneurs’ reflexive reputation is robustly correlated with agent’s expectation of norm enforcement within their community. The higher the self-perceived reputation, the stronger the entrepreneur’s expectation, that defectors would be facing community sanctions within their locality. In particular, having a reputation for providing business advice to others, and a reputation for informing others about ongoing malfeasance is associated with the prevalence of community sanctions in standard forms of business malfeasance. In other words, we identify a strong link between an individual’s reputation to contribute to the public good and local norm enforcement. Those who do not contribute to the public good do also not expect to benefit from community enforcement of business norms.