Markets from meaning: quality uncertainty and the intersubjective construction of value

Abstract

This article explores price formation in markets where quality cannot be based on intrinsic characteristics of the good exchanged. In such markets, quality uncertainty is not an information problem as described by Akerlof in the market for lemons model. Instead, defining quality is a problem of contingent assessments that are arrived at intersubjectively through discursive practices and mutual observation of market participants. Quality is endogenous to the market process. Institutions and conventions play an important role, much as they do in the market for lemons model, but their function is to generate confidence rather than trust. Prices emerge in such markets from a combination of intersubjectively established quality assessments, institutions and existing structural characteristics of the market. I call this the markets from meaning model, which I develop based on the art market and expand to capital investments and financial speculation.