Trust and Trustworthiness in Commodity Business Markets

The markets for true commodities are different from those for other goods. While buyers in other markets are concerned with many facets of quality, commodity purchasers care only that the final product for these goods meets a single standard. Does this affect the extent to which participants in these markets must rely on trust when transacting?

With support from the Foundation, Peter Kollock will investigate the commodity business market for propane gas. He will consider the role of trust and trustworthiness in reducing transaction costs, particularly when pre-existing agreements are modified. He will also examine the role of trust and trustworthiness when things go wrong in daily transactions. In addition, he will detail the role of intermediaries in the creation and maintenance of business relationships.

To gather data, Kollock will conduct extensive interviews with key buyers, sellers, and intermediaries in the propane markets of California and Texas. He will ask about transactional practices in the propane market, and trust-based strategies and relationships. The interviews will also cover terms of payment and delivery, responses to price shocks and broken trades, relationships outside the market, and the delegation of authority.