Journal Article
Category theory finds that markets partition producers into categories and producers who do not fit one specific category - or who span multiple categories - perform worse than their single-category peers. The dominant thread of this work argues that this miscategorization penalty arises when cognitive limits of categorization cause individual members of the market’s audience to exclude or denigrate ill-fitting producers.
The author presents a null model of markets in which a miscategorization penalty appears without being caused by a market audience: drawing on cognitive science and research on rugged landscapes, the model shows that producer herding behavior generates a spurious correlation between market outcomes and miscategorizations. The model further predicts the dynamics of categorical emergence and change over time.
The author establishes these results in a simulation and discuss strategies by which this landscape model can be empirically distinguished or integrated with the standard account of an audience-driven penalty.
Faculty
Assistant Professor of Organisational Behaviour