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Social structure and reputation: the NASDAQ case study

  • Valérie Revest


    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - Université 13 - CNRS)

  • Samira Guennif


    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - Université 13 - CNRS)

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.

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

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Date of creation: 2005
Date of revision:
Publication status: Published in Socio-Economic Review, Oxford University Press (OUP), 2005, 3, pp.417-436
Handle: RePEc:hal:journl:halshs-00163731
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  1. Samuel Bowles & Herbert Gintis, 2002. "Social Capital and Community Governance," Economic Journal, Royal Economic Society, vol. 112(483), pages 419-436, November.
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