Reputation Networks and "Loose Linkages" between Reputation and Quality

In this article a network model of the development of a suppliers' reputation in a market with quality uncertainty is presented. This model is based on communication and interaction processes within a market. It is shown that reputation is influenced by three factors: The customers experiences with a certain supplier, the diffusion of this information within the network "market", and customers using this information in their product evaluation process. The model suggests that reputation by no means presents automatic insurance against opportunism. High reputation may even prevent transactions under circumstances discussed here.