Philip Evans, Bob Wolf

A force critical to lowering transaction costs is trust. Trust substitutes for search, negotiation, monitoring, and enforcement; it substitues for hierarchical control internally and for the legalisms of contracts externally. The core elements of trust are threefold: reciprocity (the understanding that the parties will deal with each other repeatedly), reputation (the understanding that other potential parties are watching), and a common semantic (a shared language through which the parties can sort through ambiguities and arrive at mutual understandings). Reciprocity and reputation align motives, and a common semantic aligns perceptions.

Like this content? Why not share it?
Share on FacebookTweet about this on TwitterShare on LinkedInBuffer this pagePin on PinterestShare on Redditshare on TumblrShare on StumbleUpon

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.