The need for costly contingency planning exists only because economic actors behave opportunistically
Evidence
Trust enters into the argument because the presence of these costs is directly linked to the possibility that economic actors will be have opportunistically. This is obvious enough in the case of contract enforcement, but perhaps less so in those of negotiation and adaptation. Surely these latter costs are attributable to the time and expense of drafting a comprehensive agreement that attempts to account for all possible contingencies. But Williamson (1985) has made the point that in the absence of opportunistic behaviour there would be no need to attempt such costly planning: it would suffice for the two parties to agree always to adapt output to unanticipated contingencies in a jointly optimal way and always to share profits according to some general rule established in advance. Sequential adaptations would not pose risks if one could trust the other to behave honestly. — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2520
Categorization
Category: Causal Relationships
- XREF: Directly supports the reader’s Hardin thesis: trust requires observable constraints because without them opportunistic behavior dominates adaptation and negotiation, not just enforcement.
- DEFINE: Defines why opportunistic behavior — not mere uncertainty — drives the cost of adapting agreements to unanticipated contingencies.