Problem exposure and problem solving: The impact of regulatory regimes on citizens' trust in regulated sectors

Abstract

A wealth of studies has discussed the impact of different regulatory regimes on firms, but have ignored the differences in citizens' attitudes toward firms in different regulatory regimes. Exploring these attitudes is crucial to understanding the micro‐effects of regulatory regimes and market developments. This study aims to investigates the impact of regulatory regimes on citizens' trust in regulated sectors and uncovers the underlying impact mechanisms. Using a survey experiment within the context of algorithm regulation (N = 1224), we reveal that the coerciveness of regulatory regimes positively influences citizens' trust in regulated firms. Furthermore, we identify problem‐solving and problem exposure perceptions as key mediators in this relationship. The findings contribute to the ongoing debate between regulation and trust, shedding light on their interplay in contemporary society and providing practical implications for policymakers and businesses navigating complex regulatory landscapes.