Why in-group reputation dominates market reputation for trades — credence-good + loss-aversion + low-frequency selection compound

Claim (synthesis): Three mechanisms compound to make in-group reputation dominate market reputation in trades.

1. The credence-good problem. Marketing services for a trades business are a credence good ([[marketing-services-as-credence-good-for-gc]], [[darby-karni-1973-credence-goods-framework]]) — the GC cannot tell whether a website redesign was "good marketing" or merely a good-looking website. Dulleck-Kerschbamer-Sutter 2011 ([[dulleck-kerschbamer-sutter-2011-liability-verifiability-credence-goods]]) found experimentally that "allowing sellers to build up reputation has little influence" on credence-good market efficiency in the absence of liability. Reputation alone — particularly the market kind, which is unspecific — does not solve the credence-good problem. What solves it is liability (Tarion for new home construction) plus informed-peer review (in-group reputation for vendors that are not regulated).

2. Risk-aversion structure. A GC choosing a marketing vendor has substantial downside (wasted budget, lost season, brand damage) and bounded upside (a slightly higher close rate). Loss-averse buyers ([[kahneman-tversky-prospect-theory-loss-aversion-2to1]], [[brown-imai-vieider-camerer-2024-meta-analysis-lambda-1955]]) weight unfakeable in-group information higher and discount fakeable market signals.

3. Frequency structure. A GC selects a marketing vendor perhaps every three to seven years. Repeated low-frequency decisions cannot be learned by trial and error. They are made by surrogacy — the buyer outsources the decision to a trusted peer who has made it more recently.

Confidence: Synthesis of verified mechanisms; in-domain application is Directional.

For Candid: This is the theory of why marketing assets without network membership are noise. The buyer is operating in a regime where the unfakeable signal dominates the fakeable signal, the loss-domain weighting amplifies the asymmetry, and the low-frequency decision cycle forces reliance on surrogate-peer judgment.