When Being in the Minority Pays Off: Relationships among Sellers and Price Setting in the Champagne Industry

Economic sociologists have studied how social relationships shape market prices by focusing mostly on vertical interactions between buyers and sellers. In this paper, we examine instead the price consequences of horizontal relationships that arise from intergroup processes among sellers. Our setting is the market for Champagne grapes. Using proprietary transaction-level data, we find that female grape growers—a minority in the growers’ community—charge systematically higher prices than do male grape growers. We argue that the underlying mechanism for this unexpected pattern of results involves the relationships developed and maintained by minority members. More specifically, in-depth fieldwork reveals that female growers get together to compensate for their isolation from the majority. This behavior enables them to overcome local constraints on the availability of price-relevant information, constraints that stem from prevailing norms of market behavior: individualism and secrecy. We discuss the implications of these findings for the study of how relationships shape price-setting processes, for the sociological literature on intergroup relations, and for our understanding of inequality in markets

Middle-status conformity revisited: The interplay between achieved and ascribed status

Decisions about conforming to or deviating from conventional practices in a field is an important concern of organization and management theory. The position that actors occupy in the status hierarchy has been shown to be an important determinant of these decisions. The dominant hypothesis, known as middle-status-conformity, posits that middle-status actors are more likely to conform to conventional practices than high- and low-status actors do. We challenge this hypothesis by revisiting its fundamental assumptions and developing a theory where actors’ propensity to conform based on their achieved status further depends on their ascribed status that actors inherit from their social group. Specifically, we propose that middle-status conformity applies only to actors who have a sense of security, based on their high ascribed status. For actors with low ascribed status, we propose that high-and low-status actors show greater conformity than middle-status actors. We test our hypotheses using data from the U.S. symphony orchestras from 1918 to 1969

Who is Punished Most for Challenging the Status Quo?

Over time, markets evolve into particular structures, with clearly defined roles in terms of who does what in the industry. When a firm ventures beyond these established roles, it often gets punished by its exchange partners. Our interviews in the market for Champagne grapes, however, suggest that some buyers get penalized substantially more than others in response to such actions. Quantitative analysis confirms that nontraditional buyers receive price penalties for role deviations—through diversification, vertical integration, or dis-integration—whereas traditional firms are treated much more leniently. We conducted a subsequent interpretivist study, using interview data from 78 market participants, to explore the exact mechanisms underlying this effect. The analysis reveals that sellers blame less traditional buyers when they cross the boundaries of their usual roles, because they are thought to act out of volition and bad faith, whereas they believe that the same transgressions by more traditional firms must have been necessitated by external circumstances. We conclude that the sanctioning behavior of actors in response to role transgressions by their exchange partners is driven by their interpretation of the motives underlying these transgressions, rather than by the actions themselves. As a result, nontraditional firms may also find it difficult to deviate from the traditional roles in their industry

The Price You Pay: Price-setting as a Response to Norm Violations in the Market for Champagne Grapes

Contrary to the general view that markets are shaped by economic forces, bargaining power, and the prior relationships between exchange partners, this paper posits that markets can sometimes also be purely socially constructed, in the sense that prices can vary irrespective of the economic value embedded in the exchange. Building on insights from the literature on categories, we argue that sellers may react to violations of local norms on the part of particular buyers by charging them higher prices. Sellers thus provide economic benefits, in the form of lower prices, to buyers who closely adhere to the category’s norms. We test these ideas using data on the market for Champagne grapes, examining the exchange between grape growers (the sellers) and the 66 houses that make the sparkling wine (the buyers). Interviews and survey data informed us that growers have clear, normative ideas about what a Champagne house should look like and do: houses that are no longer headed by a descendant of the founder, are not located in one of the traditional Champagne villages, are relative newcomers to the industry, are part of a corporate group, supply supermarket brands, operate winemaking subsidiaries abroad, or acquire their own vineyards are all viewed in a negative light. Our models provide strong support for our prediction, showing that the prices different organizations are charged for their purchases depend substantially on whether they meet local expectations for who they are and what they do. Our qualitative evidence confirms that this differential pricing by growers occurs not through collusion but through a spontaneous, bottom-up process

For Love or Money? Gender Differences in How One Approaches Getting a Job

Extant supply-side labor market theories conclude that women and men apply to different jobs but are unable to explain gender differences in how they may be have when applying to the same job. We correct this discrepancy by considering gendered approaches to the hiring process. We propose that applicants can emphasize either the relational or the transactional aspects of the job and that this affects whether they are hired. Relational job seekers focus on developing a social connection with their employer. In contrast, transactional job seekers focus on quantitative and mechanical aspects of the job. We expect women to be more relational and men to be more transactional and that this behavior will contribute to differences in hiring outcomes. Specifically, we contend that being relational suggest that one is more committed to the job at hand and therefore should increases the chances of being hired – holding constant competence. We examine behaviors in an online contract labor market for graphic designers, Elance.com where we find that women are more likely to be hired than men by about 4.1%. Quantitative linguistic analysis on the unstructured text of job proposals reveals that women (men) adopt more relational (transactional) language in their applications. These different approaches affect a job seeker’s likelihood of being hired and attenuate the gender gap we identified. Attenuation suggests that how one approaches the hiring process matters and that gender is correlated with a particular style of engagement