I was once cheated by a small shop owner in downtown Chicago, who sold me a watch battery that was already dead, although it had recovered just enough to make my watch run for long enough to let me think the battery was okay. That shop owner’s success was parasitic on the larger system of shops and stores that were more trustworthy, because my behavior in his shop was merely a generalization of my normal behavior in shops, most of which in my experience had been trustworthy. In a particular shop that I might have used in my own neighborhood, I would not have needed to bother to check whether the shopkeeper opened a sealed package to take out a new battery. That shopkeeper depended on reputation for business by repeat customers. In the downtown shop, I should have kept a more diligent eye on the shopkeeper because his business depended on casual traffic and not on repeat business or reputation.

XREF: Connects to the concepts of reputation economics, trust, and institutions sustaining cooperative markets.

Russell Hardin, Trust and Trustworthiness, loc. 1017