Trust and Exchange : Effects of TemporalTrust and Exchange : Effects of Temporal Embeddedness and Network Embeddedness on Providing and Dividing a Surplus

Abstract

Mutually profitable cooperation is characterized by the fact that the combined efforts of the cooperating parties generate a certain surplus. The first part of the book studies the production of a surplus as a trust problem between two actors. Should an actor provide resources if the other actor can decide on the division of the surplus if it materializes? Under which conditions is trust in a reasonable division of the surplus warranted? We study the effects of `temporal embeddedness'. If both actors interact repeatedly, they can learn something about the other actor's trustworthiness from past interactions. And, they can control their relation by facilitating or hampering future exchange in which both actors should be interested. The first part of the book studies the effects of such `temporal embeddedness' on the provision of a surplus between two actors. Hypotheses are derived on the basis of a simple social capital stock model. These hypotheses are tested using experiments as well as survey data. The second part of the book studies the division of a given surplus. We consider the case where actors are embedded in a network structure and connected actors can engage in dyadic negotiations on the division of a surplus. We show how the actors' network embeddedness determines their success in bargaining. We thus provide predictions on the actors' shares of their surpluses from bilateral negotiations with their partners. Further, we specify conditions for a decay of a negotiation structure into substructures by showing that it is sometimes favorable for an actor not to utilize possible negotiation ties. Predictions on the division of a surplus and on `network breaks' are tested using evidence from laboratory experiments.