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Social structure and reputation: the NASDAQ case study

Author

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  • Valérie Revest

    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique)

  • Samira Guennif

    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique)

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.

Suggested Citation

  • Valérie Revest & Samira Guennif, 2005. "Social structure and reputation: the NASDAQ case study," Post-Print halshs-00163731, HAL.
    • Handle: RePEc:hal:journl:halshs-00163731
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00163731v1
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    References listed on IDEAS

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    1. Riccardo Boero & Giangiacomo Bravo & Marco Castellani & Francesco Laganà & Flaminio Squazzoni, 2009. "Pillars of Trust: An Experimental Study on Reputation and Its Effects," Sociological Research Online, , vol. 14(5), pages 49-67, November.

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    Keywords

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