![]() In the first treatment (which we call Market PE), the market environment permitted exchanges that were more personal (i.e. We utilized a two-treatment experimental design. This experimental design allowed buyer-seller pairs to have positive market interactions, where trading partners followed through on the agreements to exchange which they entered, and negative market interactions, where trading partners entered into and ultimately defected on exchange agreements. In our experiment, subjects interacted with one another as a buyer or seller in a market environment with opportunities to defect and then played the trust game with each subject in the opposite market role. By personal exchange we mean exchange between actors who know one another and by impersonal exchange we mean exchange between actors who do not know one another. In this study, we used a laboratory experiment to study whether positive and negative market interactions can affect the trusting and reciprocating behavior of former trading partners and whether the personal/impersonal nature of market exchanges can influence the levels of trust and reciprocity that they exhibit. While qualitative evidence has established that meaningful social relationships characterized by trust and reciprocity can and do emerge between economic actors, there have been relatively few quantitative and even fewer experimental studies that have examined the emergence of trusting relationships between market actors and how different market institutions facilitate the formation of such relationships. These market relationships often turn into deep social connections characterized by trust and reciprocity. Think, for instance, of the conversations between hairdressers and their clients, the relationships between children and their caretakers, and the connections between colleagues in an office or on the factory floor. Because people are not automatons, these market conversations and interactions tend to extend beyond strictly economic topics and terrain. ![]() However, it is also a space where buyers and sellers get together, interact and converse with one another. neoclassical) economics implies, the market is the site where buyers and sellers negotiate and exchange goods, information, and other resources. The market, however, is a social space where meaningful social connections can and do develop. Specifically, the potential of markets to allow for the emergence of social relationships characterized by trust and reciprocity has been relatively understudied. But less attention has been given to whether or not market transactions can facilitate the emergence of trust. As Arrow stated, “Virtually every commercial transaction has within itself an element of trust… It can be plausibly argued that much of the economic backwardness in the world can be explained by a lack of mutual confidence.” Trust as a facilitator of market interactions has been widely studied. Trust facilitates market exchanges by lowering transactions costs since it would be costly (perhaps prohibitively) to address all possible contingencies of a transaction. Trust is a key ingredient of almost all market interactions. However, in the market where exchanges are more impersonal, people exhibit the same levels of trust and reciprocity to trading partners regardless of the nature of their previous market interactions. In the market where exchanges are more personal, people exhibit higher levels of trust and reciprocity to trading partners with whom they have mostly positive market interactions than with whom they have mostly negative market interactions. Further, we find that past market dealings only affect the trusting and reciprocating behavior of subjects who participated in an experimental market where exchanges were more personal, but did not affect trust and reciprocity between trading partners who participated in an experimental market where exchanges were more impersonal. We find experimental evidence that suggests that positive and negative market interactions can affect such behavior. Additionally, we explore the effect of personal and impersonal exchange on the trusting and reciprocating behavior of former trading partners. In this study, however, we investigate whether market interactions can affect the subsequent trusting and reciprocating behavior of former trading partners. ![]() Much of the literature on the relationship between trust and market activity, however, has focused on how trust facilitates market activity rather than on how market activity affects trust. ![]()
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