Social Exchange Theory

Social exchange theory adapts microeconomic theory to a wide variety of exchanges between people and groups. Indeed, social exchange theory is not one theory but several theories that describe the emergent properties of social interaction. The most extensive application of social exchange has been in the area of interpersonal relationships. Social exchange theory has been invoked to explain how social relationships form, expand, and wither. More recently these theories have been used to characterize relationships between individual stakeholders and organizations.

Social exchange differs from economic exchange in that social exchange is relatively informal. It involves obligations that cannot be specified in advance; the exchange is less time bound than economic exchange. Unlike economic exchange, the elements of social exchange are quite varied and cannot be reduced to a single quantitative exchange rate. Social exchange requires one to trust others to honor their obligations. Relationships emerge out of titfor-tat reciprocity in minor social transactions as both parties display their trustworthiness. Social exchange contrasts with economic exchange in that it tends to foster feelings of personal obligation and gratitude.

Simple social exchange models assume that rewards and costs drive relationship decisions. When relationship rewards exceed costs, a person moves to expand the exchange in a relationship. In contrast, when costs exceed rewards, the person will halt relationship advance or even terminate the relationship. In a mutually beneficial exchange, each party supplies the wants of the other party at lower cost to self than the value of the resources the other party provides. In such a model, mutual relationship satisfaction ensures relationship stability.

However, people often put up with less-thansatisfactory relationships. John Thibaut and Harold Kelley (1959) proposed two comparison standards to differentiate between relationship satisfaction and relationship stability. Relationship satisfaction increases when the balance of rewards and costs in the relationship exceeds the person's comparison level. The comparison level is based on the person's past experience or social observation. When the reward/cost balance falls beneath these expectations, the person will be dissatisfied with the relationship. Some people demand higher profits from their relationships than other people do. What is a satisfactory exchange to one person will be an unsatisfactory exchange to another person.

Relationship stability is determined by how the present relationship compares with the comparison level of alternatives—or the level of rewards that the person thinks she can obtain in other relationships. If the current relationship is perceived to be more profitable than the alternatives, the relationship should endure, independent of the person's relationship satisfaction. Combining these two standards, we can distinguish four kinds of relationships: (a) the still-born relationship, in which the [Page 784]association falls beneath the person's comparison level and available alternative relationships (i.e., low satisfaction and low perceived alternatives); (b) the unstable relationship, in which the relationship compares favorably with one's expectations but lags behind the perceived relationship alternatives (i.e., satisfied but attracted to other relationships); (c) the malaised relationship, in which a relationship compares unfavorably with the comparison level, but rates better than the alternatives; and (d) the blissful relationship, in which the target relationship exceeds one's expectations and the comparison level of alternatives.

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