Negotiated Exchanges in Social Networks

Abstract

Network exchange theory predicts relative profits from negotiations among actors in social exchange networks (Markovsky et al. 1993; Markovsky, Willer & Patton 1988). Here we extend the theory to allow exact predictions, rather than merely ordinal, for actors' exchange profits. This is accomplished by integrating two important factors. First, a resistance model predicts bilateral negotiation outcomes within a given set of network constraints. It does so by weighing actors' interests in gaining the best possible exchanges against their desires to avoid the worst. Second, the resistance model predictions are modified by actors' profit expectations. In particular, we incorporate two factors that affect such expectations, both common features of ongoing exchange relations: the number of other actors to whom one is directly connected in the network, and the likelihood of one's completing exchanges with them. We derive hypotheses from the theory and test them in two very different experimental settings. We find that the theory's predictions are more accurate than those of previous versions of the theory and those offive alternative theories. Social exchange theory grew from the application of the economic theory of exchange to social relationships. Sociology focuses on a problematic area for economic theory: the exchange of valued objects in relatively small groups, where actors seek to settle on one optimal outcome out of a range of possibilities. How can we predict that outcome? And how are such outcomes affected by social structure? Homans (1958, 1974) suggested that principles of behaviorist psychology would help to answer these questions. Blau's (1964) approach used rational choice and utility theory. Theoretical work on the problem since then has largely developed from one or the other perspective, sometimes combining the two.