Exchange Theory

Exchange theory was developed by social psychologists and sociologists to model human relationships as forms of reciprocal trade. People give things to each other to get things back. When I give a gift to a friend, I do so for exchange reasons, not necessarily to receive a gift but perhaps, say, out of gratitude and to further friendship through conversation.

Exchange theorists model these exchanges much as economists model trade or bargaining. People who trade can create value by exchanging in a mutually beneficial way, but they might have divergent interests with regard to the precise nature of the trade in the sense that they place different valuations on the commodity being traded. The difference in valuation is the potential surplus created through trade, and this gives both the incentives to exchange. However, each might have an incentive to pretend to value the exchange less than they really do to gain extra from the trade. For example, one lover might pretend he is less enamored of his partner than he really is, to extract more care and attention from her. He might lead her to believe that if she does not give complete devotion he might leave the relationship, whereas he would show her complete devotion if he thought she was about to leave him. In economic terms, the two lovers have a common interest in the production of the “love surplus” but diametrically opposed interests with regard to its distribution.

In standard (pre-game-theoretic) economic discussions of trade, power takes almost no role. All we have are two partners who can trade for mutual advantage. However, most people would see a potential power relationship in the previous discussion. Imagine for a moment two potential lovers. The first (a man, say) is desperate for the affection of the other, but the second (a woman) is relatively indifferent to the affection of the first. The asymmetry with regard to distribution of affection means that the second lover can demand great attention from the first while giving relatively little in return. Observing such a relationship, we might say she has a great hold over him: she has the power to force him to behave in ways that he would prefer not to. She will not let him go to the sporting events he would like to attend, mix with his old friends, and so on. There is an exchange going on, one that [Page 224](by assumption) he prefers to not having this exchange at all, but one that disadvantages him relative to her. In other words, she gains more than he does because she values the exchange less.

Exchange theory deals with these types of asymmetrical power relationships by examining the nature of trades with regard to the equity. In exchange theory, if both parties have similar attitudes toward equitable exchange—that is, both (a) hold the same beliefs about relative profit and (b) hold the same beliefs about equitable exchange—then inequitable social exchange will not continue in the long term because one party might feel annoyed and the other guilty. More interesting for social exchange theory is where the parties do not have similar attitudes. This is seen in the example given earlier, where the beliefs of the parties about the relative profit vary drastically. However, third parties (the friends of the two lovers, for example) might have similar attitudes toward relative profit and, hence, see one partner as exploiting the other. In social exchange theory, therefore, the degree of power of partners in social exchanges is measured relative to the valuations of the profits of the exchanging parties.

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