Norms, Hierarchy, and Market Order: A Study of Closed Auction Markets for Antiques and Secondhand Goods

This study explores how market order emerges in Japanese closed auction markets for antiques and secondhand goods. Most auction markets for antiques and secondhand goods are exclusive to dealers in Japan. The Antique Business Act (Kobutsu Eigyo Ho) states that participants in auction markets must have a secondhand goods dealer license. Participants also need to obtain a reference from an existing member to enter the markets. Dealers belong to auction markets and associate with other members. The markets are similar to groups rather than pure markets, although the members compete to acquire articles at the auctions. This paper presents the norms and hierarchical relationships in closed auctions that bring order to the markets.

Norms in markets are beliefs about the expected behavior of market participants. The norms alone are not sufficient to engender market order; enforcement mechanisms are necessary. A hierarchy is a typical enforcement mechanism. Authorities observe members and then sanction those who deviate from the norms. Although markets and hierarchies have been regarded as opposing governance mechanisms, hierarchical relations emerge in markets as well as in groups. Market participants in the same marketplace differ in terms of status and power.

The norms in Japanese auction markets require participants to bid based on their own evaluation of items. Buyers who do not have much expertise on auctioned articles may try to follow experts’ bidding. Such bidding is condemned by auctioneers, senior members, and top buyers who have significant influence in the markets. Their status is earned by their contribution to the markets. They make great efforts to attract dealers and goods to the markets. Participants accept their authority because they know that the markets do not function without their contributions. Although their influence will distort market competition, the hierarchical structure ensures orderly function in markets.