Social Exchange Theory

Social Exchange Theory Definition

Social Exchange TheorySocial exchange theory is a broad social psychological perspective that attempts to explain how human social relationships are formed, maintained, and terminated. The basic premise of this theory is that how people feel about a given interaction or relationship depends fundamentally on the outcomes that they perceive to be associated with it. More specifically, the perceived costs and benefits that accompany a person’s interactions determine how he or she evaluates them. To the extent that rewards are seen as high and costs are seen as low, a person tends to feel good about a relationship and will stay in it. If perceived costs increase or perceived benefits decrease, however, satisfaction with the relationship will decline and the person is more likely to end it.

Because social exchange theory is very general in nature, it can be readily applied to understanding a variety of different social relationships and situations. For instance, social exchange principles can provide insight into people’s business relationships, friendships, and romantic partnerships, among other types of social involvements. In addition, these principles can be applied to understanding relationships involving individual people or social groups.

Theoretical Background and Principles of Social Exchange Theory

Social exchange theory is based on the idea that people seek to maximize rewards and minimize costs in any given social relationship. Rewards can consist of anything tangible or intangible that an individual considers valuable. For instance, business relationships may provide several concrete benefits, such as income or material goods, in addition to several more abstract benefits, such as prestige and a sense of security. Costs include anything that an individual considers to be unrewarding or sees as requiring a significant amount of time or effort. For example, romantic relationships may involve costs such as shared housework and spending vacations with one’s in-laws (which, for some people, can be extremely unpleasant). Of course, the evaluation of rewards and costs is highly subjective because that which is rewarding for one individual might not be quite as rewarding for another person. Similarly, that which is considered rewarding in one relationship might not be perceived as rewarding in a different social involvement.

People’s evaluations of perceived rewards and costs influence how satisfied they are with their relationships and the relative stability of those relationships. Satisfaction with a relationship is determined by considering one’s outcome comparison level (i.e., the standard by which one judges his or her current relationship’s outcomes). For instance, a person may compare his or her current outcomes with those he or she has received in a past relationship of a similar type. So, you might compare how things are going now with your current boyfriend or girlfriend with how things went with past romantic partners. To the extent that a person’s current outcomes exceed his or her previous outcomes, the person is satisfied with a relationship and desires it to continue. However, if a person’s current outcomes don’t compare favorably to his or her previous outcomes, the person becomes dissatisfied and is less likely to work at furthering the relationship. People compare their current outcomes not only to past outcomes but also to those that they could be receiving now in other potential relationships (referred to as the comparison level for alternatives). To the extent that the outcomes people perceive as possible within an alternative relationship are better than those that they are receiving in their current relationship, they are less likely to continue in the current relationship.

Reward-to-cost ratios and comparison levels are subject to change over time, as individuals continually take stock of what they have gained and lost in their relationships. This implies that relationships that a person found satisfying at one point in time may become dissatisfying later because of changes in perceived rewards and costs. This may occur because certain factors may become less rewarding or more costly over time. For instance, sex may be extremely rewarding for members of a newly married couple but may become less so as passion and spontaneity decrease over the years.

Finally, people’s perceptions of their relationships also depend on whether the exchanges that occur are viewed as equitable. Equitable or fair exchanges are necessary to avoid conflict between relationship partners. For instance, assume that there is favorable exchange for all parties involved in an ongoing relationship, but one party is receiving substantially greater benefits than the other. Such a scenario may be perceived as unfair because distributive justice is not present (i.e., outcomes are being distributed unequally). In this case, individuals with worse outcomes may feel exploited and have negative feelings about their exchange partner, which may ultimately affect how committed they are to continuing the relationship.

Social Exchange Theory Example

A recent college graduate accepts his or her first job with a large corporation because it has an excellent reputation and pays well. At first, the graduate loves the new job. Eventually, however, he or she comes to realize that his or her supervisor does not treat the graduate with respect, and he or she is so overworked that there is little time to enjoy the large salary. The graduate considers leaving the current job and starting his or her own company. This is seen as desirable because it would allow the graduate to be his or her own boss and set his or her own hours. Then the graduate receives a promotion at work. No longer having to work as many hours and free from the previous supervisor, the graduate decides to renew the contract with the corporation.

Limitations of Social Exchange Theory

Social exchange theory is limited in some ways. For example, the theory does not address the role of altruism in determining relationship outcomes. That is, people do not always act in self-interested ways (i.e., maximizing rewards and minimizing costs). For instance, in intimate relationships, people act communally, working for the benefit of their partner or relationship, sometimes even at great cost to oneself. Although evidence for this has been found for romantic relationships, this may not hold for other types of involvements, such as business relationships. Therefore, although social exchange principles have implications for a variety of different types of social relationships, they may explain some types of relationships better than others.


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