Trust Somebody but Choose Carefully: An Empirical Analysis of Social Relationships on An Exchange Market

27 Pages Posted: 29 Jan 2019

See all articles by Sylvain Mignot

Sylvain Mignot

Catholic University of Lille

Annick Vignes

Ecole des Ponts ParisTech

Date Written: September 5, 2018

Abstract

This article analyses the influence of trust on the functioning of a market for perishable goods, where there exists no quality signal and quantities can be scarce. On this market, agents can choose between bidding or exchanging through bilateral transactions. It is well accepted in economy that trust plays an important role in transactions but its definition and measurement stay, as far as we know, very elusive. Starting from the empirical analysis of a market with a peculiar organization, the Boulogne-sur-mer fish market, where people have the choice between trading through auctions or bilateral exchanges, we propose a measurement of trust, based on the dynamics of agents’ encounters. We then analyze the differences in the social network structures and estimate how they affects the market outcomes. We bring into the light that, when the transaction links on the auction market reflects the economic constraints of the partners, the relationships on the bilateral market depends on something more. Clearly, the prices of the bilateral transactions are the consequences of economics and non economics determinants. At first glance, the stable co-existence of two market structures looks like a paradox. Our results help to understand the distinctive characteristics and functioning of each sub-market. This discussion contributes to the debate about the efficiency of market structures.

Keywords: market design, trust, social networks

JEL Classification: L14, D85, D47

Suggested Citation

Mignot, Sylvain and Vignes, Annick, Trust Somebody but Choose Carefully: An Empirical Analysis of Social Relationships on An Exchange Market (September 5, 2018). Available at SSRN: https://ssrn.com/abstract=3317538 or http://dx.doi.org/10.2139/ssrn.3317538

Sylvain Mignot

Catholic University of Lille ( email )

Lille
Lille
France

Annick Vignes (Contact Author)

Ecole des Ponts ParisTech ( email )

6-8 avenue Blaise-Pascal, Cité Descartes
Champs-sur-Marne
Marne-la-Vallée Cedex 2, 77455
France

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