Reputation in Offline and Online Markets: Solutions to Trust Problems in Social and Economic Exchange

In his seminal 1985 paper, Mark Granovetter criticises classical and neoclassical economists’ underand modern sociologists’ over-socialised conceptions of economic action. He argues that individuals do not maximise their utility functions independently of each other, but also that their actions are not the result of a behavioural script being executed since they internalised it through socialisation. Moreover, he criticises the ways these scholars have explained the necessity and existence of trust and cooperation in domains of social and economic life that are impenetrable to market mechanisms. Advocates of new institutional economics have argued that, in these domains, social and economic institutions will evolve that provide real incentives for cooperative behaviour and discourage moral hazard. Others have argued that, even in the presence of such institutional arrangements, actors will have to overcome a residual uncertainty in social interactions, and the fact that they do overcome it is evidence for a generalised morality and trust.