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Trust in the New Economy

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  • Avner Ben-Ner

    ()

  • Louis Putterman

    ()

Abstract

What do trust and the economy have to do with each other? In a world of perfect and symmetric information, where all related economic actions are simultaneous and occur in one place, the economy runs in the familiar fashion of the perfectly competitive market. In such a world, trust among economic actors is not needed. But in the real- and the virtual- world, there are some elements of many transactions that neither party can observe while the transaction is taking place, and other elements that are observed by only one party. Often one party's action precedes that of the other, but the first action is predicated on the execution of the latter. A buyer, e.g., pays with the expectation of subsequent delivery of a product with certain attributes. Or the buyer pays for a product or a service the quality of which she can judge only later. While some issues associated with asymmetric information and the absence of simultaneity between related actions have been examined extensively in the literature in the context of agency theory and other areas of economics, other issues have received less attention. Many transactions in the new economy, for instance, entail the transmittal of information (credit card details, address, etc.) that may be used against the wishes and interests of the person supplying it. How important to the consumer is protection from such abuses, and how can it be made affordable?

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Paper provided by Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus) in its series Working Papers with number 1102.

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Handle: RePEc:hrr:papers:1102

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Cited by:
  1. Sergio Román & Pedro Cuestas, 2008. "The Perceptions of Consumers Regarding Online Retailers’ Ethics and Their Relationship with Consumers’ General Internet Expertise and Word of Mouth: A Preliminary Analysis," Journal of Business Ethics, Springer, vol. 83(4), pages 641-656, December.
  2. Sergio Roman, 2007. "The Ethics of Online Retailing: A Scale Development and Validation from the Consumers’ Perspective," Journal of Business Ethics, Springer, vol. 72(2), pages 131-148, May.
  3. Jones, Derek & Kato, Takao, 2007. "The Impact of Teams on Output, Quality and Downtime: An Empirical Analysis Using Individual Panel Data," Working Papers 104-24, Department of Economics, Colgate University.

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