The market dynamics of socially embedded trading
Kenneth A Frank,
Yun-Jia Lo,
G Geoffrey Booth and
Juha-Pekka Kallunki
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Kenneth A Frank: Michigan State University, USA
Yun-Jia Lo: Independent Scholar, USA
G Geoffrey Booth: Michigan State University, USA
Juha-Pekka Kallunki: University of Oulu, Finland; Stockholm School of Economics, Sweden; Aalto University, Finland
Rationality and Society, 2019, vol. 31, issue 2, 152-181
Abstract:
Social embeddedness has provided a compelling challenge to neoclassical descriptions of markets. Nevertheless, without a corresponding description of the micro-social forces that counter embeddedness, the description of embeddedness is essentially static, and does not integrate the dual forces of embeddedness and markets. In this study, we identify a sociological force counter to embeddedness residing in third parties whose presence may interrupt socially embedded informal trading partnerships. Using data from the Helsinki Stock Exchange in 1996–1997, we confirm that stock trades are socially embedded in partnerships in which trading persists from week to week and in which prices deviate from immediate trading prices. Importantly, we find that trading partnerships are more likely to be interrupted when prices deviate from immediate trading prices and when third parties are present who trade with one or both members of the partnership. Thus, third parties are a critical sociological force in the embeddedness-market dynamic.
Keywords: Social embeddedness; third parties; trading partnerships (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ratsoc:v:31:y:2019:i:2:p:152-181
DOI: 10.1177/1043463118805168
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