PurposeThe purpose of this paper is to verify the moderating role of trust in the relationships between environmental uncertainty and a manufacturer's propensity for vertical control over its supplier, and between environmental uncertainty and the manufacturer's satisfaction with the supplier performance. It also confirms a threshold effect of trust, i.e. the moderating role of trust is present up until a threshold value of trust is reached.Design/methodology/approachSurvey research was conducted to collect data from manufacturers; structural equation modeling was used to purify measurement scales, and multiple regression was conducted to test the hypotheses.FindingsThis study confirmed that a manufacturer's perception of a supplier's trustworthy behavior weakens the justification for a higher degree of vertical control over its supplier's key decisions. Trust also reduces the manufacturer's discontent with its supplier's performance.Research limitations/implicationsTraditional transaction cost analysis (TCA models) put too much emphasis on rationality and seldom consider the complexity of inter‐firm control in social contexts. This study demonstrates that considering trust in TCA supplements the explanations offered by TCA on buyer‐seller behaviors.Practical implicationsManufacturers should determine the level of needed vertical control after assessing the level of inter‐firm trust to avoid unnecessary vertical control, which is as costly as, if not costlier than, supplier opportunism. Manufacturers should also realize the importance of formalizing continuous, two‐way information flow to further reduce supply market uncertainty, which cannot be done by trust beyond the threshold value.Originality/valueThis study considers both social embeddedness and TCA to enhance the explanatory power of the TCA framework. Additionally, this study shows that the moderating effect of trust is statistically significant at lower levels while the effect fades away at higher levels of trust.

Despite the intuitive appeal of conceptualizing time as a resource, like money, to which prospect theory should apply, the application of prospect theory to time-related decisions has met with mixed results. Existing literature has failed repeatedly to find evidence of loss aversion and the characteristic reflection effect in the realm of time, leading researchers to conclude that consumers have an overriding preference for certainty with respect to time, unlike other resources. This article presents evidence to the contrary. Drawing on literature from organizational behavior, the authors posit that consumers' schedules provide the reference points necessary to produce the reflection effect in time-related decisions. Two experimental studies support this expectation. Potential rationales and limiting conditions are explored.