Mcdevitt (2010) - A Business By Any Other Name Firm Name Choice As A Signal Of Firm Quality

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Has article title A Business By Any Other Name Firm Name Choice As A Signal Of Firm Quality
Has author Mcdevitt
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©, 2016


McDevitt, Ryan (2010), "A Business by Any Other Name: Firm Name Choice as a Signal of Firm Quality.," mimeo, northwestern university pdf


This paper presents a simple economic model of a firm's name choice. The model predicts that the content of a firm's name will be correlated with its service quality under certain conditions, which belies the intuition that a firm's name will represent only cheap talk about itself. Using unique data from markets for local plumbing services, the model's main result is confirmed empirically: plumbing firms with names that begin with an "A" or a number receive more than five times as many complaints regarding poor service, on average. Moreover, firms that attempt to conceal their reputations by using multiple names also provide lower-quality service. These qualitative results extend to paid listings on Internet search engines. Firms that advertise on Google receive more complaints, all else equal, which casts doubt on the validity of sorting equilibria commonly used in the theoretical literature on position auctions.