Board, Simon and Ter-Vehn, Moritz Meyer creator text American Economic Journal: Microeconomics monographic eng

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14(2), May, 2022: p.44-80 We study the life cycle of a firm that produces a good of unknown quality. The firm manages its quality by investing while consumers learn via public breakthroughs; if the firm fails to generate such breakthroughs, its revenue falls and it eventually exits. Optimal investment depends on the firm's reputation (the market's belief about its quality) and self-esteem (the firm's own belief about its quality), and is single-peaked in the time since a breakthrough. We derive predictions about the distribution of revenue and propose a method to decompose the impact of policy changes into investment and selection effects. – Reproduced American Economic Journal: Microeconomics 221226