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==Theory Questions:==
===What is the research question?===
===How might these tests be run if one had quantitative evidence? ===
A key, underpinning aspect of the model is its infinite horizon assumption. Without it, the agents have less of an incentive to be honest.
Suppose that an exogenous factor results in some agents having better opportunities than being an honest trader. If the agent knows he will leave the trading business in advance, he would have no more reason to maintain his reputation and should begin shirking until he leaves the industry.
If we had data about entries and exits to the agency business, we may be able to learn something about whether reputation is indeed driving good behavior.
===What problems might arise in this quantitative analysis?===
Unfortunately the data mentioned above probably does not exist. Even if it did, one might wonder why an agent (and we researchers) would know about his improved outside options without his employers ever knowing about it.
The types of events that would lead an agent to change careers (starting a new business, marrying into a rich family, etc) are often observable in a social context and are likely to be known by their employers (the merchants).
If the merchants knew that the infinite horizon was about to end, they would respond by no longer hiring the agent -- since the agent no longer has incentives for good behavior.
