How not to build an online market: the sociology of market microstructure

Abstract

This paper examines the attempts to create new online markets for the trading of wholesale standardized goods during the late 1990s. The vast majority of these business-to-business (“B2B”) exchanges failed. These failed attempts provide invaluable data on the necessary underpinnings of online commodity markets and the social dynamics that drive them. Focusing on the US market for propane as our case, we discuss the model that drove the development of many business-to-business exchanges, the social dynamics of the propane industry and the attempts to create an online propane market, the role of informal risk management, and some initial lessons about the design of markets. Ignoring the behavioral realities of markets led to designs and technology that in many cases were incompatible with the needs of market participants.

Citation

Kollock, P. and Russell Braziel, E. (2006), "How not to build an online market: the sociology of market microstructure", Thye, S.R. and Lawler, E.J. (Ed.) Advances in Group Processes (Advances in Group Processes, Vol. 23), Emerald Group Publishing Limited, Leeds, pp. 283-306. https://doi.org/10.1016/S0882-6145(06)23011-X