Structural Authority and Market Distortion: A Comparison of Mediated Markets Represented as Network Structures

• In Event: 355 - Section on Economic Sociology Roundtable Session (one-hour).
  In Refereed Roundtable: Table 06. Trust in Uncertain Markets

Abstract

Abstract Increasingly, intermediaries act as brokers and arbiters of quality judgments. Intermediaries such as college rankings and review aggregators provide metaknowledge, or a reduced form information about producer quality which serves as a simplifying heuristic and assists outsiders in dealing with complex and/or high stakes decisions. Intermediaries differ in how they collect and distribute information. Likewise, mediated markets differ in the extent to which they are centralized or decentralized. This paper will draw on simulations to detail the effects of five prototypical tripartite network structures and evaluate the influence of intermediary structure on the extent to which quality judgments are agreed upon and accurate in a mediated market. Brokers performing and distributing firsthand research must have large advantages in accuracy over the typical consumer to improve system accuracy over a purely decentralized network structure. On the other hand, review aggregators that compile secondhand accounts of consumer experiences produce sizable improvements in systemic accuracy by connecting consumers to independent perspective that they might not have had access to beforehand.

Author

• Craig Tutterow, University of Chicago