Social Exchange Theory

Cite this article as: Shraddha Bajracharya, "Social Exchange Theory," in Businesstopia, February 17, 2018,

Social exchange theory is a social psychology concept that views human relationships as a kind of results-driven social behavior. We choose to start and maintain relationships that maximize benefits and minimize costs.There is a certain amount of give and take in each relationship and the valuing of benefits and costs within them determine whether or not one chooses to continue that association.

History of Social Exchange Theory

American sociologist George Homans is credited as the founder of social exchange theory, however he was not the first one to study this phenomenon. Homans first explained the theory in his article “Social Behaviour as Exchange”, published in 1958. “Social behavior is an exchange of goods, material goods, but also non-material ones, such as the symbols of approval or prestige. Persons that give much to others try to get much from them, and persons that get much from others are under pressure to give much to them.” – Homans, 1958.John Thibaut and Harold Kelley wrote about social exchange theory in their 1959 book “A Social Psychology of Groups.” Homans’ studies focused on dyadic exchange while Thibaut and Kelley centered on the dyad and the small group.Peter M. Blau expanded on Homans’ work in “Exchange and Power in Social Life” in 1964. His writings focused on the economic and utilitarian perspective on social exchange.

Assumptions of Social Exchange Theory

Thibaut and Kelley have put forward two categories of assumptions when it comes to social exchange theory.

Assumptions based on human nature

  • As rational beings, humans like rewards and avoid punishments.
  • Humans evaluate costs and rewards using standards that change over time and vary person to person.

Assumptions based on nature of human relationships

  • Relationships are interdependent and function as a process.

Core concepts of Social Exchange Theory

Social exchange theory sees social behavior as a result of a process of interactive exchanges. These exchanges help people weigh the potential benefits and costs of social relationships. The purpose of social exchange is to maximize positive interactions and minimize negative interactions. When the costs of the relationship outweigh the benefits, people will likely abandon the relationship.

Costs vs rewards

Social exchange theory says that people tend to calculate if the relationship is worthwhile by subtracting its costs from rewards.Worth=Rewards-CostsCosts and rewards associated with the other person ultimately decide the fate of the relationship.Costs refer to the elements in a relationship that have negative value to a person. Money, effort and time put into a relationship are costs.Rewards refer to the elements that have positive value to a person. Acceptance, validation, and companionship are rewards.

Comparison level

According to social exchange theory, people continue to compare the costs and benefits of a current relationship to those of past relationships. Thibaut and Kelley proposed that a comparison level (CL) is a standard (expectations) that people use to evaluate the satisfaction of their current relationship. Similarly, people evaluate the stability of their relationship by considering the alternatives outside of the relationship (comparison level for alternative, CLalt). After a cost-benefit analysis to decide if a person wants to start a relationship and putting them to the test against the comparison levels, the person might look at the alternatives to having the relationship.Example: In a romantic relationship, one might compare their current partner to their previous partners and expect the same level of affection that they previously got. But, the current relationship might not measure up to their comparison level, leading the person to seek alternatives.

Criticisms of Social Exchange Theory

Katherine Miller presented several major problems with the social exchange theory. According to Miller,

  • This theory reduces interpersonal interaction to a rational process.
  • Developed in the 1970s, the theory invites openness and freedom in ideas, which might not be the best option for everyone.
  • Relationships are not always linear and intimacy is not always the ultimate goal of a relationship, both of which are assumptions of social exchange theory.
Cite this article as: Shraddha Bajracharya, "Social Exchange Theory," in Businesstopia, February 17, 2018,