The Institutional Modality of Market with an Application to Financial Assets

Abstract

The sympathy-consent dimension provides the analytics which is able to explain the economic problems that may arise from the interpersonal relations between and among bounded-rational agents. It is the open/indeterminate system which contrasts with the closed/determinate system of the value-cost rationality dimension. What difference does this dichotomy in analytics(Hume’s divide) make in economic phenomena? One clear example is the wavering behavior which means to indicate the shying actions away from the market. Wavering action is in fact a causal root core reason for Akerlof’s lemon market failure(1970). Institutional modalities of the market are learned from the experiences as a way to rein in the opportunistic behaviors of relation exchanges and to soothe the wavering behavior. When human beings were born to the primitive jungle, it was the anomie state of opportunistic behaviors of relation exchange. By developing technological innovations and institutionalized standards, human beings succeeded in building the modes of competition out of the anomie, thus holding the wavering action in check and triggering the explosive expansion of exchange transactions. The market is the most developed mode of competition.