Journal Article

Social structure and reputation: the NASDAQ case study

Samira Guennif and Valérie Revest

in Socio-Economic Review

Published on behalf of Society for the Advancement of Socio-Economics

Volume 3, issue 3, pages 417-436
Published in print September 2005 | ISSN: 1475-1461
Published online September 2005 | e-ISSN: 1475-147X | DOI: http://dx.doi.org/10.1093/SER/mwi018
Social structure and reputation: the NASDAQ case study

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  • Moral Philosophy
  • Corporate Social Responsibility
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  • Economic Sociology

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In 1996, two investigations conducted by the Securities and Exchange Commission and the American Department of Justice reported non-competitive practices among market makers on the NASDAQ. These reports also mentioned the influence of the NASDAQ social structure on market makers' behaviours. Most market makers adopted social norms in order to increase significantly their income at the expense of the customers. This paper aims to explain the rise and long-term effects of non-competitive practices through the integration of a concrete view of embeddedness. We propose the use of game theory tools to achieve this goal. A re-reading of Kreps's model of reputation sheds light on its structural dimension and illustrates the way social structure governs individual behaviours.

Keywords: NASDAQ; non-competitive behaviours; embeddedness; social structure; game theory; reputation; trust; JEL classification: A12, A14, B41, L14, G14, G15

Journal Article.  7793 words.  Illustrated.

Subjects: Moral Philosophy ; Corporate Social Responsibility ; Welfare Economics ; Political Economy ; Economic Sociology

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