MIT Sloan Asst. Prof. Karen Zheng
Trust is important to our relationships with friends, family, and acquaintances. Less understood, though, is the role trust can play in business relationships. When businesses deal with each other, their first impulse often is to summon their lawyers. But I have found in my research that there are many situations in which trust can be an effective replacement for costly and time-consuming contract negotiations.
To understand the role of trust in business, I and two colleagues, Ozalp Ozer of the University of Texas at Dallas and Kay-Yut Chen of Hewlett-Packard Laboratories, conducted a series of computer laboratory experiments that simulated one of the most vexing problems in supply chain management: The tendency for manufacturers to issue overly optimistic forecasts.
Buying an automobile is probably the second largest purchase you’ll make after your home. Not only will you spend tens of thousands of dollars on it, but if you are like most people, you’ll live with it for a long time. Given what a major decision it is, one of the biggest factors when deciding which car to purchase is trust. If you don’t trust a particular company, you certainly aren’t going to invest the time and energy to evaluate its vehicles.![[MIT logo]](http://mitsloanexperts.mit.edu/wp-content/themes/twentyeleven/img/logo_mit.gif){kind=logo}
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