Advanced Search
MyIDEAS: Login to save this paper or follow this series

Social structure and reputation: the NASDAQ case study

Contents:

Author Info

  • Valérie Revest

    ()
    (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII)

  • Samira Guennif

    ()
    (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII)

Abstract

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" (Granovetter, 1985). We propose the use of game theory tools to achieve this goal. A rereading of Kreps' model of reputation sheds light on its structural dimension and illustrates the way social structure governs individual behaviours.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://halshs.archives-ouvertes.fr/docs/00/16/37/31/PDF/ARTICLE_GuennifRevestNasdaq.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00163731.

as in new window
Length:
Date of creation: 2005
Date of revision:
Publication status: Published, Socio-Economic Review, 2005, 3, 417-436
Handle: RePEc:hal:journl:halshs-00163731

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00163731/en/
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: NASDAQ; non-competitive behaviours; embeddedness; social structure; game theory; reputation; trust;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers, UCLA Department of Economics 10A, UCLA Department of Economics.
  2. Grossman, Sanford J, et al, 1997. "Clustering and Competition in Asset Markets," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 40(1), pages 23-60, April.
  3. Breton,Albert & Wintrobe,Ronald, 2008. "The Logic of Bureaucratic Conduct," Cambridge Books, Cambridge University Press, number 9780521071727, 9.
  4. Barclay, Michael J., 1997. "Bid-ask spreads and the avoidance of odd-eighth quotes on Nasdaq: An examination of exchange listings," Journal of Financial Economics, Elsevier, Elsevier, vol. 45(1), pages 35-60, July.
  5. Dutta, Prajit K & Madhavan, Ananth, 1997. " Competition and Collusion in Dealer Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 52(1), pages 245-76, March.
  6. Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, American Finance Association, vol. 49(5), pages 1813-40, December.
  7. Klein, Benjamin, 1980. "Transaction Cost Determinants of "Unfair" Contractual Arrangements," American Economic Review, American Economic Association, vol. 70(2), pages 356-62, May.
  8. Hirschman, Albert O., 1985. "Against Parsimony: Three Easy Ways of Complicating some Categories of Economic Discourse," Economics and Philosophy, Cambridge University Press, vol. 1(01), pages 7-21, April.
  9. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 21(1), pages 115-57, January.
  10. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
  11. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  12. Samuel Bowles & Herbert Gintis, 2001. "Social Capital and Community Governance," Working Papers, Santa Fe Institute 01-01-003, Santa Fe Institute.
  13. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
  14. Kandel, Eugene & Marx, Leslie M., 1997. "Nasdaq market structure and spread patterns," Journal of Financial Economics, Elsevier, Elsevier, vol. 45(1), pages 61-89, July.
  15. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 615-41, August.
  16. Demsetz, Harold, 1997. "Limit orders and the alleged Nasdaq collusion," Journal of Financial Economics, Elsevier, Elsevier, vol. 45(1), pages 91-95, July.
  17. Christie, William G & Harris, Jeffrey H & Schultz, Paul H, 1994. " Why Did NASDAQ Market Makers Stop Avoiding Odd-Eighth Quotes?," Journal of Finance, American Finance Association, American Finance Association, vol. 49(5), pages 1841-60, December.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00163731. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.