Institutionalization in efficient markets: The case of price bubbles

Sheen S. Levine*, Edward J. Zajac

*Corresponding author for this work

Research output: Contribution to conferencePaperpeer-review

1 Scopus citations

Abstract

The micro-foundations of institutionalization in markets remain conjectural to date. We seek to deepen and extend those foundations while contributing to the sociological understanding of markets, by using a high-efficiency financial market as our empirical context. We utilize a well-established experimental methodology from behavioral economics to observe and measure micro processes. We find that financial markets, despite textbook conditions of high efficiency - perfect information, atomistic agents, no uncertainty - quickly develop patterns of behavior that are consistent with our predictions of a institutionalization process. We show that purely psychological explanations are insufficient to account for these patterns. The findings imply that institutionalization can happen even in extremely undersocialized conditions and even in synthetic markets designed for high economic efficiency.

Original languageEnglish (US)
DOIs
StatePublished - 2008
Event68th Annual Meeting of the Academy of Management, AOM 2008 - Anaheim, CA, United States
Duration: Aug 8 2008Aug 13 2008

Other

Other68th Annual Meeting of the Academy of Management, AOM 2008
CountryUnited States
CityAnaheim, CA
Period8/8/088/13/08

Keywords

  • Experiment
  • Institutionalization
  • Market

ASJC Scopus subject areas

  • Management Information Systems
  • Management of Technology and Innovation

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