Trust Elasticity: The Economic Impact of Trust on Revenue and Profit

This working paper introduces Trust Elasticity, a managerial economics framework for quantifying the responsiveness of business outcomes to changes in trust. While trust has long been recognized as an important factor in customer relationships, it has rarely been modeled as an economic responsiveness variable analogous to price elasticity or demand elasticity. The paper defines and develops four related constructs: Conversion Trust Elasticity, Retention Trust Elasticity, Revenue Trust Elasticity, and Profit Trust Elasticity. The framework incorporates differentiated trust effects among prospective and existing customers, transferable trust effects, pricing power, retention dynamics, and cost structure mediation. Worked examples illustrate how trust improvements may be monetized through alternative strategic pathways, including premium capture strategies and growth-and-loyalty strategies. The paper further discusses implications for managerial decision-making and offers a methodological foundation for future cross-industry Trust Elasticity benchmarking.