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Can someone explain to me the concept of reputation? I understand how to get it, but I don't understand how it works. I'm not sure if I want a higher reputation or a lower reputation, and I don't have any clue what the reputation even does. Does it change dialogue? Does it influence various scenes? If someone could explain this to me in depth I would be very grateful.

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Sorry, not in-dept but maybe this much as a start: In fights it influences if the opponent wants to hurt your PC or rather tries to seduce it.

As well, there is at least one place where your char gets gang-roped if the reputation is "Werewolf: Loving". So a high reputation is not always a good thing.
Then there is a place where NPCs invite your PC to spend time with them, if its reputation is good amongst that group of people - but they instantly throw your PC out if the reputation is bad.

In the end you should try good, bad and neutral and see. So it is not the case that a good or bad or neutral reputation always has exactly that outcome. At least that's my experience so far.