AUDIENCE S TRUCTURE AND C ATEGORY S YSTEMS IN MARKETS ∗ Özgecan Koçak SabancıUniversity Michael T. Hannan Stanford University Greta Hsu University of California at Davis December 15, 2009 Abstract Research in the sociology of markets finds that schemas and category systems in markets provide frameworks for perceiving and evaluating prod- ucts and producers, thus making valuation and exchange possible. These meanings need to be shared by market participants to create order. This raises the question: How do consensual schemas and category systems emerge and develop? In this paper, we theorize about two processes through which audiences in markets converge on meanings and reach extensional and intensional consensus around market categories: a process of interac- tion among the mass audience and a process of the vanguard influencing the mass audience. We develop a formal theory for these two processes which lead to implications for how structure of the audience affects lan- guage elaboration and category differentiation. We test these implications using data on 23 market categories in eBay. We find that interaction in the mass audience is associated with language use but not category differen- tiation. We find that the prevalence of three kinds of vanguard we study - activists, insiders, and enthusiasts - is associated with category differenti- ation, while the prevalence of insiders increases language elaboration. ∗ We appreciate the financial support of the Stanford Graduate School of Business and the Stan- ford GSB Faculty Trust and comments by participants in the Naymaros Organizational Ecology Group. 1