Reputational Discounting

Corporate reputations are considered to be a highly valuable asset critical to organizational success; negative reputations are thought to be the portent of organizational failure. Reputations are expected to influence purchase and other exchange decisions. Decision makers, however, not only select firms with strong positive reputations but also engage with firms with less favorable or negative reputations. Reputational discounting occurs when decision makers actively suppress or disregard the reputational information; that is, they overlook positively reputed firms or suppress negative reputations and engage with firms with unfavorable reputations. This entry examines the implications of and the explanations for reputational discounting.