Contracts, Opportunism and Trust: Self-Interest and Social Orientation

Bruce R Lyons and Judith Mehta ()

Cambridge Journal of Economics, 1997, vol. 21, issue 2, 239-57

Abstract: This paper analyzes the role of trust in facilitating efficient exchange relations when agents are vulnerable to opportunistic behavior. Two distinct mechanisms suporting trust are distinguished: self-interested trust (SIT) which is foward-looking, and socially-oriented trust (SOT) which has its roots in the past. The former is the only source of trust recognized in the mainstream economics literature, while the latter draws heavily from sociology. The authors develop the implications of isolated and of repeated exchange for the existence of SIT or SOT and for the role of formal contracts in exchange relations. The paper concludes with a discussion of the feasibility of empirical testing to distinguish SIT from SOT. Copyright 1997 by Oxford University Press.

Date: 1997
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