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Trust and Relationships in the Sharing Economy

BY PAOLO PARIGI, 25/03/2016

Market economies never fully displaced bartering and gift exchanges. In small-scale enclaves of our social world, these two types of interactions remained common even after the full development of capitalism. My cousin handing down clothes for my daughter, or the trading of items between collectors are both examples of how this type of exchanges has continued in modern economies. Compared to exchanges in the market economy, bartering requires more trust—trust that the product is not damaged, trust that your partner is going to follow through, trust that a next exchange will happen. When comparing them to one another, we see that gift exchange differs from bartering because it creates expectations of reciprocity facilitating the emergence of social bonds between the exchanging partners.

Interactions occurring in the sharing economy, while being also market transactions,  present some of the characteristics of bartering and gift exchange. Like bartering, they rely on extra trust between the two exchanging partners. Like gift exchanges, they have the potential to create bonds. What technology has made possible is the hybridization of pre-modern forms of exchanges with modern market transactions. This is what I think is very distinctive of the sharing economy.

Let me focus first on the latter aspect—the creation of social bonds. The new hybrid form of exchange is generating a new type of relationship—a weaker form of dyadic bond and a stronger type of general bond.  From the perspective of dyadic relationships, the bond that unites two individuals in the sharing economy is weaker and easier to dissolve (Parigi and State 2015; Parigi and Cook 2015). The bond that connects a host and a guest in Airbnb, or the short-lived relationship between a driver and a passenger in Uber—despite requiring more trust than a regular market transaction, remains a fleeting tie. From the perspective of the collectivity or community, the bond created by the two exchanging partners is stronger and more concrete than previous bonds that symbolically linked individuals to communities. The Uber rider, or the guest of an Airbnb, by the virtue of having experienced their trust reciprocated, feel more connected with the two platforms compared to an hotel guest or the passenger of a regular taxi company. By the same token, the bad behavior of a guest, a driver, a host or a passenger may undermine the sharing platform more than the bad behavior of a consumer in a market transaction.

A question arises of whether this new hybrid form of relationship is going to become common in other dimensions of human interactions outside the sharing economy. The diffusion of technology to more and more spheres of our lives—from talking to our neighbors to choosing a romantic partner—appears to suggest a positive answer to the above question (Parigi and Henson 2014).  In this respect, studying interactions within the sharing economy implies the studying of potential future transformations of many relationships—friendship, marriage, parenting: they are all type of bonds that have been impacted significantly by technology.  What I predict are weaker dyadic bonds and stronger community bonds, even outside the context of the sharing economy.

20160104122458_74391Let me now move on to the other aspect that is key for sharing economy transactions—trust. Trust is a loaded word which has several different meanings to different people. Most researchers agree broadly that trust is the belief that somebody with whom you are interacting will choose not to harm you even if he is in a position to do so (Gambetta 1988). Trust permeates market economies (Granovetter 1985) but its centrality is enhanced in sharing economy transactions (Botsman and Rogers 1985). This is due to the fact that some of the institutional guarantees and safeguards that usually regulate markets are not present, or are uncertain, in sharing economy exchanges. For instance, Airbnb rentals are illegal in many cities. If the interaction between a host and a guest goes in an unexpected direction,, the legal recourse open to the two parties is currently limited.

The dynamic of trust in sharing economy sites is driven by ratings—their averages and their numbers. Both aspects create expectations about the partners that overcome the paralyzing uncertainty of entering in an interaction with little (institutional) safeguards. Ratings create reputations that are then broadcasted everywhere within the community. Indeed, ratings facilitate the emergence of trust between individuals and extend it to further distances in the social space.

Using both criteria, i.e., the amount of trust placed in the exchanging partner and the capacity of the interaction to generate a bond, we can now attempt to classify sharing economy sites. That is, I will make sense of sharing economy sites, using trust and relationship-formation capacity as analytical tools and criteria (Parigi and Wang 2015). Toward this goal, I divide sharing economy sites in three groups, (1) sharing sites; (2) rental sites; (3) redistribution sites.

ratings facilitate the emergence of trust between individuals and extend it to further distances in the social space

In sharing sites, the interpersonal trust between the two partners is at its maximum and the explicit goal is that of producing new relationships. The original Couchsurfing platform was a perfect example of a site of this type, offering little space for lifting some of the trust in the unknown other to the platform itself (insurance, protection etc). Furthermore, the interaction required no exchange of money between the host and guest. The mission of the website was to promote intercultural exchanges. Sharing sites are, for many enthusiasts, the expression of the sharing economy ideals at their fullest.  

In rental sites, the online platform has taken steps to reduce the amount of interpersonal trust placed on the exchange. Furthermore, the goal of the exchange is not to create a bond between two people, but rather to better connect demand for services and their offer. The outcome of rental sites is the production of general bonds between each users and the platform. Airbnb, Uber, and other most iconic companies in the sharing economy are sites of this type. Rental sites are the most well – known examples of the sharing economy.

Similarly to rental sites, redistribution sites have taken many steps to reduce the weight on interpersonal trust. In the ideal typical case, trust flows not between individuals but from them to the platforms.  Differently from rental sites, redistribution sites transfer the ownership of the good to the other party. They don’t create relationships between exchanging partners or between the users and the platform. Ebay, perhaps the first sharing economy site, was a site of this type. Given the absence of the need for interpersonal trust, some question whether redistribution sites are part of the sharing economy in the first place.

While imperfect, this classification highlights the key social characteristics of sites operating in the sharing economy. It also shows what is unique about the present time and the impact that technology has had on our social world. Whether the digital revolution is going to continue is unclear to me. However, the extent of the changes we have experienced in our social world, and the centrality of the sharing economy sites in catalyzing them, should be evident.

Paolo Parigi

Paolo Parigi is Associate Director at the Institute in the Social Sciences at Stamford University. His area of expertises verges on institutional analysis and Sociology. In 2015 he published “Risk Aversion and Engagement in the Sharing Economy” in the journal Games, as well as “Trust and Relationship in the Sharing Economy” in the Journal Contexts.

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