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risk involved in such interactions. The trustor's dependence on the trustee is reduced
thanks to the institutional expectations that promote good behavior and enforcement
mechanisms that penalize bad behavior [ 62 ]. To fully understand how institutions
achieve this moderating function, we first examine a number of different institutions
and their impact on trust.
Trust in a Social Context
Trust is a foundational aspect of social relations. It is often studied in the context
of transactions, both economic and non-economic. Some characterizations view
trust from a market perspective. Coleman introduces the notion of time as a crucial
precondition of trust in transactions [ 8 ]. In a market where transactions occur over
a period of time, one party delivers certain goods or makes an investment. The
exchange in response to this investment will occur at a later time. As a result, the
investor is hoping or expecting that the other parties involved in the transaction
will complete the transaction as planned. This transactional aspect concentrates
on the actions of others and how they control the resources. The risk inherent in
these transactions comes from the possible loss of resources that are invested in the
transaction or from the loss of opportunity. The dependence comes from the level of
control the trustee has over the resources.
The notion of utility is generally used to capture the costs and the benefits
of the transactions. Social theories differ in how utility is defined. Economic
models consider a self-interested agent who wants to maximize her utility. Market
mechanisms define the cost of transactions by incorporating the many different
concerns of the parties involved in the transactions. The main question in such
an approach is whether the market prices incorporate all possible risk in the
interactions. If that is the case, the decision to trust is reduced to one of risk
management. The trustor needs to choose the appropriate risk that she is willing to
accept for a certain amount of expected utility. Such a system does not incorporate
the trustor's long-term dependence on the trustee and assumes that the trustor
depends on the trustee for a single transaction. However, if the trustee does not
perform as expected, then the trustor is free to move to a different trustee at the
appropriate market price and the trustee will face negative consequences imposed
by the market.
In contrast with the economic view where individuals maximize utility, some
social and cultural models aim to explain behavior as a function of the costs that
society imposes on individuals through sanctions. In this model, individuals choose
behavior patterns that are acceptable within the social groups to which they belong.
The social norms and expectations define the costs associated with different courses
of action. For example, fulfilling a contract is a socially accepted behavior and
failing to do so will result in a sanction imposed by society. The trustors depend
on the enforcement of the social norms, which is a form of public good. Either
all will enforce these norms or they are not useful to anyone. One of the common
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