Cooperation with and without trust online

The sweeping and extensive penetration of the Internet generates endless possibilities for emergent associations and exchange. Engendering trust may be critical to enabling agents to gain from such exchange; for example, trust can assist in overcoming dilemmas related to multinational organizations, global virtual teams, auction and barter sites, house exchange sites, peer-to-peer file swapping sites, and on and on (Iacono and Weisband 1997; Jarvenpaa and Leidner 1999; Kirkman et al. 2002). The formation and continuance of trust online, however, runs into obstacles that jeopardize the fulfillment of the great potentials of the Internet for mutually beneficial exchange (see Nissenbaum 2004; Dutton and Shepherd 2003; Ben-Ner and Putterman 2003.) The logic of repetition and expectation of future exchange is a primary generator of trust in everyday life (Hardin 2002). But online exchanges are often singular, and may not be supported by thick relationships, geographic proximity, or FtF (face-to-face) interaction between agents. The formation of local norms can engender cooperation as well (Cook and Hardin 2001), but online spaces are often normatively thin. Without trust the great potential of the Internet for exchange may be jeopardized, crowding out entrepreneurs and traders. This chapter explores the possibilities of generating trust and cooperation online, and looks at mechanisms that emerge to overcome risk and facilitate cooperation. Following Harvey James (2002), I distinguish between two methods of managing trust problems. One is generating trust by altering agents' expectations about the future behavior of others, without institutional intervention and leaving agents' vulnerability intact. A second approach involves establishing institutions that alter the strategic setting, transforming the problem of trust into one about the competence of third parties. The distinction between trust-based cooperation and cooperation without trust frames the rest of this chapter.