A Research on the Dual Value Model of Individual Transaction Decision in Ethnic Chinese Society

Abstract

Abstract In ethnic Chinese society, interpersonal relationships significantly influence transaction decisions, contrasting with Western economic rationality which often neglects the role of "human relationships". This research introduces a Dual Value Model (DVM) to explore how Chinese individuals navigate these complex interpersonal dynamics in transaction decisions. It highlights the integration of Potential Social Value (PSV), stemming from the counterparty's social status (vertical relationship) and emotional closeness (horizontal relationship), with Potential Economic Value (PEV), focusing on the economic outcomes of the transaction. These two potential values are defined through expectancy theory to facilitate communal comparison. This duality necessitates a balance, demonstrating a unique economic-social tradeoff where individuals might accept lower economic benefits in favor of enhancing or maintaining favorable “Guanxi.” The concept of "guanxi mark-down (GMD)" and "Compensatory Mark-up (CMU)" are introduced as strategies employed to steer this balance, reflecting the social etiquette and economic pragmatism within Chinese transactional behavior. The research aims to provide a nuanced understanding of Chinese transaction decision-making, offering insights for guiding interpersonal relationships and economic considerations in a socio-cultural context deeply influenced by Confucian principles. Keywords: Transaction decision, Dual value model (DVM), Potential social value (PSV), Potential economic value (PEV), Guanxi; Expectancy theory.