The multi‐layer governance of incomplete market: Research based on comparative institutional experimentation

Abstract

Purpose

The purpose of this paper is to focus on the characteristics, efficiencies and interaction of many alternative market governance modes, by the approach of comparative institutional experimentation.

Design/methodology/approach

First, a highly simplified model of market economy is developed, which is embedded in a three‐layer governance structure. Then the model is transplanted into laboratory experimentation, so the characteristics and efficiencies of different governance modes can be identified by observing the subjects' behaviors under them.

Findings

The experimental results show that the market with governance structure based on rule is more efficient than the market with governance only based on long relation and based on preference or belief, and the dynamic improvement of governance based on rule has a destructive effect on the governance based on relation and governance based on preference or belief.

Originality/value

These results have profound implications for the development or enhancement of market institutions in transition or developing countries.

Citation

Weian, L., Xiaoyi, L. and Jianbiao, L. (2010), "The multi‐layer governance of incomplete market: Research based on comparative institutional experimentation", Nankai Business Review International, Vol. 1 No. 2, pp. 125-151. https://doi.org/10.1108/20408741011052555