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Limited Partnerships and Reputation Formation

Published online by Cambridge University Press:  06 April 2009

Jarl G. Kallberg ,
Crocker H. Liu  and
Anand Srinivasan
Jarl G. Kallberg
Affiliation:
jkallber@stern.nyu.edu, Department of Finance, Stern School of Business, New York University, 44 West 4th St., New York, NY 10012
Crocker H. Liu
Affiliation:
cliu@stern.nyu.edu, Department of Finance, Stern School of Business, New York University, 44 West 4th St., New York, NY 10012;
Anand Srinivasan
Affiliation:
asriniva@terry.uga.edu, Department of Banking and Finance, Terry College of Business, University of Georgia, Brooks Hall, Athens, GA 30602.
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Abstract

This paper analyzes the optimal quality decision of a producer in a multi-period setting with reputation effects. Using a unique database of returns on real estate limited partnerships (RELPs), we empirically examine alternative theoretical predictions of optimal producer strategy. In particular, we test whether the producers in our market invest in reputation building by initially selling high quality goods and then lowering quality. Using a variety of statistical tests, we find evidence consistent with reputation building, both in the aggregate and for individual developers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 39 , Issue 3 , September 2004 , pp. 631 - 659
Copyright
Copyright © School of Business Administration, University of Washington 2004

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