The Emergence of Market Order through Organizational Processes: A Study of Closed-Auction Markets for Antiques and Secondhand Goods in Japan

This study explores how market order emerges in the closed auction markets for antiques and secondhand goods in Japan. It employs the qualitative research methods of in-depth interviews and fieldwork in closed auction markets. Most Japanese auction markets for antiques and secondhand goods are exclusive to licensed dealers. Limited memberships in closed auctions facilitate the establishment of reciprocal and hierarchical relationships and the development of informal norms and conventions among participants. The closed auction can be regarded as a typical example of a “partial organization” (Ahrne and Brunsson, 2011), which is defined as a form of social order that should be distinguished from networks and institutions (2011:84). This paper adopts an organizational approach to markets (Ahrne and Brunsson, 2011; Ahrne, Aspers, and Brunsson, 2014) and explores how elements of the social organization of closed auctions contribute to bringing about and maintaining order.

According to Ahrne and Brunsson (2011), the elements of organization consist of membership, hierarchy, rules, monitoring, and sanctions. In closed auctions, reciprocal and hierarchical relationships develop among the limited membership, while rules, norms, and conventions are established through the social interaction of its participants—its violators are sanctioned primarily by high-status members. Reciprocity among the managers of auction markets and their participants contributes to the stabilization of supply and demand/valuation. The managers make an effort to maintain social relationships with supplying dealers and continually request that they bring particular articles to their markets. To develop relationships with the suppliers, the managers are obliged to bid and buy auctioned articles that are not bid on by other participants. This obligation stabilizes demand and valuation, provides dealers with positive incentives, and makes dealers reciprocate by continually suppling articles to those markets.

Stable expectations of other participants’ behavior also matter in closed auctions. Participants have to be familiar with and comply with the rules and conventions developed in the auction markets, and violators are criticized by managers, auctioneers, or other high-status participants who have significant influence. Thus, the hierarchical relationships also serve as enforcement mechanisms in closed auctions. Participants’ high status is earned by their accumulated contribution to the auction markets. Such contributions may include purchasing a certain quantity of auctioned articles or other supportive behavior, such as conducting obligatory bidding and buying as mentioned above. Other participants accept this authority because they understand that the markets do not function well without the high-status members’ contributions and power of influence. 

Hierarchical relationships, however, have the dysfunctional effect of distorting market competition and inhibiting fairness among participants. Furthermore, reciprocity between participants at auctions is not always regarded as a virtue because it entails reciprocal conceding bidding, which does not increase market prices. Market participants in closed auctions collectively try to control market competition by maneuvering the elements of membership, rules, reciprocity, and hierarchical relationships, as well as the cultural script of auctions as competitive markets, which is utilized when reciprocal and hierarchical relationships have dysfunctional effects on the performance of auction markets.