Reputation und Kooperation

The institutionalized system of rating sellers in internet-auctions is a powerful tool to promote cooperation. This system encourages rational actors to “invest in reputation” and, consequently, to behave cooperatively. We analyze the strategic behaviour of sellers and buyers and, particularly, we investigate with empirical data whether there is a “premium on reputation”. Ulrich Brinkmann and Matthias Meifert critically comment on our article. In this rejoinder we discuss their objections and particularly the measurement of reputation. Also, we explore the question of the relevance of an institutionalized system of reputation. Is an exogeneous sanctioning mechanism a necessary prerequisite to generate a stable amount of cooperation as Brinkmann and Meifert argue or does the institution of a reputation system suffice? To answer this question further experimental or simulation studies are required.     

A THEORY OF EX POST VERSUS EX ANTE PRICE DETERMINATION

The traditional theory of exchange implicitly assumes instantaneous exchange at the contractually determined price. However, actual exchange may entail payment before or after supply as well as determination of effective price ex ante or ex post of supply. The paper demonstrates that the market determination of price timing arises in conjunction with the resolution of mutual uncertainty among buyers and sellers concerning product quality and product cost. The conditions are identified under which ex post pricing will result rather than the more traditional ex ante pricing. The theory accounts for the simultaneous use of ex post and ex ante pricing in a single market. Legal service pricing is used to illustrate the theoretical principles derived in the paper.     

Believe it when you see it: Dyadic embeddedness and reputation effects on trust in cryptomarkets for illegal drugs

Large-scale online marketplace data have been repeatedly used to test sociological theories on trust between strangers. Most studies focus on sellers’ aggregate reputation scores, rather than on buyers’ individual decisions to trust. Theoretical predictions on how repeated exchanges affect trust within dyads and how buyers weigh individual experience against reputation feedback from other actors have not been tested directly in detail. What do buyers do when they are warned not to trust someone they have trusted many times before? We analyze reputation effects on trust at the dyadic and network levels using data from an illegal online drug marketplace. We find that buyers’ trust decisions are primarily explained by dyadic embeddedness - cooperative sellers get awarded by repeated exchanges. Although buyers take third-party information into account, this effect is weaker and more important for first-time buyers. Buyers tend to choose market exit instead of retaliation against sellers after negative experiences.     

Knowledge and valuation in markets

The purpose of this theoretical article is to contribute to the analysis of knowledge and valuation in markets. In every market actors must know how to value its products. The analytical point of departure is the distinction between two ideal types of markets that are mutually exclusive, status and standard. In a status market, valuation is a function of the status rank orders or identities of the actors on both sides of the market, which is more entrenched than the value of what is traded in the market. In a market characterized by a standard, the situation is reversed; the scale of value is more entrenched than the rankings of actors in the market. In a status market actors need to know about the other actors involved as there is no scale of value for evaluating the items traded in the market independently of its buyers and sellers. In a standard market it is more important to know how to meet the standard in relation to which all items traded are valued. The article includes empirical examples and four testable hypotheses.

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Spontaneous evolution of social exchange—An experimental study

Each of several exchange partners owns a specific commodity which she can share with others. Unlike in other social dilemma scenarios like prisoners’ dilemma, public goods games, etc., voluntary cooperation relies on bilateral exchanges whose profitabilities are interdependent. How will mutual sharing evolve? Will it include all group members or will smaller groups be more efficient? Our experimental data shed partly new light on older topics: cooperation is now relation specific, allowing for discrimination; group size effects are explored dynamically rather than in one-shot interaction; and, finally, we have weakened demand effects for voluntary cooperation by realistic efficiency gains.     

Vertrauen bei Internet-Auktionen

The text replies to the article “Trust and Reputation in Internet-Auctions” (KZfSS, Vol. 54, No. 4, pp. 674–693) by Diekmann and Wyder. In principle the authors’ consideration regarding a premium for reputation for trustworthy participants in internet auctions seems to be attractive. However, we object to the lacking definitions of the categories of trust and reputation as well as to the problematic design of their central indicator (reputation). With regard to their interpretation we criticize the missing consideration of qualitative — especially negative — statements in the public rating systems, underestimating the relevance of “critical incidents” to fragile trust relations on the internet. Finally we remark that Diekmann and Wyder misjudge the founding, cultivating and modifying activities (including imposing sanctions) of the platform owner towards this institution regulating the market.     

COMPETITION AND BIDDING BEHAVIOR: SOME EVIDENCE FROM THE RICE MARKET

When objects have uncertain value, the net effect of competition in sealed-bid auctions is ambiguous. The risk of succumbing to the "winner's curse" generally causes bidders to exhibit a non-aggressive response in addition to the standard competitive effect. Sellers can influence the size of the nonaggressive effect by responding to the value uncertainty. This paper focuses specifically on individual bidding behavior in a rice auction market in which sellers issue a product-quality guarantee. The empirical evidence supports my hypothesis that such a guarantee negates the significance of the nonaggressive bidder response.     

RISK, TRANSACTIONS CHARGES, AND THE MARKET FOR FOREIGN EXCHANGE SERVICES

This paper suggests that transactions charges in foreign exchange markets, rather than being solely brokerage fees, represent exchange rate uncertainty in periods of great fluctuations by including remuneration for the assumption of risk by foreign exchange dealers. Since most of the cost of exchange rate uncertainty may be largely endogenously included in the foreign exchange markets, attempts to examine the efficient market hypothesis in these markets should most appropriately include specific consideration of transactions costs. There appears to be empirical support for the premise that transactions charges are positively related to exchange rate risk, and, as well, inclusion of contemporaneous bid-ask spreads into the interest parity schedule leaves few unexplained profits from dollar-pound covered interest arbitrage during the 1970's and underscores the notion of classifying periods by degree of turbulence in analyzing covered interest arbitrage.     

Cooperative relationships in competitive markets

This paper focuses on cooperative and relationships in competitive markets. According to economic theory, stable relationships between buyer and seller should only emerge due to some kind of market deficiencies. However, our results suggest that buyer and seller cooperate and develop relationships in a competitive market. In the international salmon industry, importers tend to concentrate their import on one or a few exporters only. However, the importers will occasionally buy salmon from other exporters. This observation indicates that both cooperation and competition will be present in a competitive market. For buyers and sellers there may be efficiency gains by both cooperating and being exposed to competition.     

Trade shows and the creation of market and industry

This study addresses the question of the constitution of markets in advanced societies. Specifically, the article studies the role of the traveling trade show in creating the real time computing market, which is part of the US electronics sector, during the mid‐1990's. Real time computing products assist the transfer, storage and processing of digital signals in real time and support many of the internet applications we use today. By applying ethnographic methods, we explore the general question of how economic actors cope with uncertainty in the phase of market‐making and at the cutting edge of technology. The paper makes two contributions to the existing literature. First, it shows that the attempt to organize a trade show in real time computing was triggered by the uncertainty experienced by sellers regarding the identity of prospective buyers and about the exact use to which they would put the emergent technology which is offered for sale. Secondly, we trace the history of an emergent market. We claim that trade shows for innovative products are important venues at which markets coalesce. The identification and ordering of market actors, the institutionalization of a distinct business culture and the social networks developed among market actors and across the subsidiary markets provided the basic social infrastructure for what later became known as the real time computing industry.     

Arrangements for market intermediation and policies. Modernizing the fruit and vegetable market in France, 1950–1980

This article studies experiments in organizing the fruit and vegetable market from the 1950s till the late 1970s. It shows that there were alternatives to the principle of distribution, e.g. modernizing traditional wholesale markets (carreau) or setting up producer controlled veilings (marchés au cadran, or “clock auctions”). After exposing the rationale underlying each of these models, the empirical conditions are examined for actually implementing change. Attention is drawn to the factors that weigh on social actors in the market, in particular the tension between homogenization and concentration on the one hand, and, on the other hand, the uniqueness of products and transactions.     

Ordering competition: the interactional accomplishment of the sale of art and antiques at auction

Auctions provide an institutional solution to a social problem; they enable the legitimate pricing and exchange of goods where those goods are of uncertain value. In turn, auctions raise a number of social and organizational issues that are resolved within the interaction that arise in sales by auction. In this paper, we examine sales of fine art, antiques and objets d'art and explore the ways in which auctioneers mediate competition between buyers and establish a value for goods. In particular, we explore how bids are elicited, co-ordinated and revealed so as to rapidly escalate the price of goods in a transparent manner that enables the legitimate valuation and exchange of goods. In directing attention towards the significance of the social interaction, including talk, visual and material conduct, the paper contributes to the growing corpus of ethnographic studies of markets. It suggests that to understand the operation of markets and their outcomes, and to unpack issues of agency, trust and practice, we need to place the 'interaction order' at the heart of analytic agenda.     

试论阿盟决策制度与阿拉伯一体化的发展

阿盟采取国家间合作与协商来防止冲突的决策制度。理论上,这种决策模式只有在某些合作收益大于单方面行动成本的政策领域才会产生共同政策,但缺乏纯粹的区域层面上的有效运作;实践上,即使在共同利益较多的经济和安全领域,阿盟一体化也只在既定的制度框架下徘徊,仅能达成各国有限的、最低的共同愿望。本文用制度主义和一体化理论来透视阿盟决策制度的本质功能及其对阿拉伯一体化发展的影响,并进一步指出未来的阿盟选择何种决策制度决定着其一体化发展的方向和水平。     

RISK AVERSION AND OVERBIDDING IN FIRST PRICE SEALED BID AUCTIONS: NEW EXPERIMENTAL EVIDENCE

Bidding above the risk‐neutral Nash equilibrium in first price sealed bid auctions has traditionally been ascribed to risk aversion. Later studies, however, offer other explanations and even argue that risk aversion plays no or a minor role. In a novel experimental design, we directly test the relationship between risk aversion and overbidding by systematically varying the distribution of risk attitudes in auction markets. We find a significant relationship between our measure of risk aversion and overbidding. (JEL D44, C91)     

Observed successful collaboration in social work practice: coherent triads in Swedish juvenile care

The purpose of this study is to analyse observed situations of successful cooperation, even if it unfolds during shorter interaction sequences. The aim is to analyse how and when the actors within juvenile care in Sweden present successful cooperation, and which interactive patterns are involved in the construction of this phenomenon. Forming the empirical basis for this study are 119 field observations of organised meetings and informal meetings before and after organised meetings, during visits to youth care institutions in Sweden, social services offices, and the Swedish National Board of Institutional Care. In this study, markers are used to define successful cooperation in the empirical material, so that actors who belong to at least three different categories will be identified (coherent triad). The professional actors can also shape a coherent triad with young people or parents in cases where past conflicts arise. When some professionals create a distance from other professional partners, conflicts can be erased so as to generate new conditions for coherence of the triad. Construction and reconstruction of collaboration success is an ongoing, interactive process. Presentation of the proper interaction moral is created and re-created during interactions and appears in the myriad of everyday interactions.     

EFFICIENCY WAGES AND SUBJECTIVE PERFORMANCE PAY

This paper studies optimal relational contracts in motivating workers in a market setting. We find that labor markets with higher turnover costs will use more subjective performance pay and less efficiency wages and that in those markets, the total wage payment is lower and the equilibrium employment level is higher. Surprisingly, under certain conditions, an increase in turnover costs leads to higher social welfare. Incorporating workers' search costs, we show that wages are procyclical in booms and are either rigid or countercyclical during recessions. The predictions of the model are consistent with some empirical evidence. ( JEL D82, J33, J41, J63)     

Resource-Based Crisis Management: The Important Role of the CEO's Reputation

This study provides empirical support for the positive power of a CEO's reputation as a strategic resource during and after a corporate crisis. Specifically, it demonstrates that a CEO's favorable reputation relieves many stakeholders' negative perceptions in a postcrisis situation. In addition, this study tests whether a particular type of CEO reputation will be more effective than another in dealing with different types of threats that a crisis poses to corporate reputation. This study introduces a resource-based approach to crisis that provides a wide, comprehensive set of strategies based on a variety of an organization's competitive resources.     

Rational exchange and trust: Business relationships in a fishing community

This paper assesses the hypothesis that in markets where information is lacking concerning the price and the quality of a commodity and the commodity is variable in its supply, sellers will tend to form long‐term, stable relationships with buyers. Data from a coastal Alabama community are used to test the nature of exchange relations between commercial shrimp fishers and the dealers to whom they sell. It is further hypothesized that the social aspects of these exchanges will better predict stable relationships than will economic aspects. The evidence presented supports the stated hypotheses. Finally, the relevance of this research for social theory is discussed.     

PROCUREMENT AUCTIONS WITH RENEGOTIATION AND WEALTH CONSTRAINTS

Renegotiation is a common practice in procurement auctions which allows for postauction price adjustments and is nominally intended to deal with the problem that sellers might underestimate the eventual costs of a project during the auction. Using a combination of theory and experiments, we examine the effectiveness of renegotiation at solving this problem. Our findings demonstrate that renegotiation is rarely successful at solving the problem of sellers misestimating costs. The primary effect of allowing renegotiation is that it advantages sellers who possess a credible commitment of default should they have underbid the project. Renegotiation allows these weaker types of sellers to win more often and it also allows them to leverage their commitment of default into higher prices in renegotiation from a buyer. (JEL C91, D44, D82)     

Legitimacy and status groups in financial markets

Economic sociologists have argued that financial markets should be analysed as uncertainty-processing social networks and intermediary groups. Networks and intermediaries alone cannot confer legitimacy upon financial actors and transactions. Status groups are a solution to this problem. They emphasize reputation, honour and good social behaviour as stabilizers of collective action, as means of social control and as indicators of legitimacy. I examine here the emergence and evolution of status groups of brokers in London, New York and Paris, and show how emphasis on honour was used to legitimize financial transactions. I argue that financial markets should be conceived as networks, intermediary and status groups. In global, automated financial markets status groups like securities analysts are gaining in prominence.