There is a great number of possible actions to reduce the moral hazard, either on the agent or principal side (Picot, Dietl & Franck, 1999: 91; Dixit & Nalebuff, 1993: 95; Kahle, 2002b: 26). Some of the actions can
be used on either side. Actions for the principal are screening and monitoring. Actions for the agent only are signaling, guarantees, securities, building up reputation and destroying bridges to opportunistic behavior.
Whereas contracts, developing tnist by teamwork, ceasing communication, automatic responses, small steps and using “professional” intermediates are possible instruments for either side. The u.se of these activities to reduce the risks of asymmetric information is expensive which the travelers normally will not be willing to pay.
To achieve a maximum of efficiency the costs of risk reduction should be minimized. Monitoring activities to reduce risks that are known to the agents are the most important. The next important instrument is building up reputation as a quality brand. Then follows in importance guarantees to the travelers as a token of commitment. The division of activities between principals and agents depends mostly on the market position. Who gains more from the process will take the risk reduction measure. The least-cost-activity-in monetary terms-to reduce the risk is trust as a reciprocal relation. Trust needs no monitoring nor any other instruments
and therefore does not cost money. Trust is a good “sui generis” (Schuize, 1997: 70) that losses and gains are counted in other than monetary dimensions. Therefore, trust is the important dimension in the tourism industry. The importance has grown with the increased amount of information and the increased velocity of information processing. Trust is the core criterion in defining a network with the least-cost lo reduce the risk of asymmetric information.

Forms of Asymmetric Information

Asymmetric information implies information deficits on one side of a transaction. This deficit may exist randomly or systematically in certain situations. The partners of a transaction are usually called “principal” and “agent,” where the principal gets a certain result and the agent delivers (and produces) it. The ftve different parts of the tourism industry constitute together with the travelers a six-stage or six-level principal-
agent problem. In effect each component within the system can be principal or agent depending upon the context of the situation concerned. The basic assumptions, problems and possible solutions of principalagent
problems have been discussed widely (Picot, Dietl & Franck, 1999: 85-131; Jensen & Meckling, 1976; Pi-att & Zeckhauser, 1985; Spremann, 1988, 1989, 1990), so we wili, after a brief description of the core problems,
focus on the industry-specific aspects. There are four kinds of asymmetries related to the different attributes
of the situation between the principal and the agent: “Hidden Characteristics,” “Hidden Actions,” “Hidden Information” and “Hidden Intentions.” They are connected with each other and there are a number of
possible actions to deal with these asymmetries, which shall be discussed under the specific aspect of tourism industry. Hidden characteristics imply that the agents or their products have attributes known to themselves, but not made known to tbe principals. Akerlof (1970) fu’st discussed this problem for the market of used cars,
where the seller knows what is wrong (or not) with his car. The potential buyers aren’t aware ofthe “real” condition ofthe vehicle and are therefore only willing to pay the price for an “average” car. Therefore the
good cars will not be offered in the market which means that cars in average condition will be of an increasingly lower standard. This “adverse selection” leads to “a market of letiions.” In the tourism industry, the carriers are possibly in a comparable situation in respect to their quality and security standards and their price policy: The travelers cannot know orevaluate(this would be a case of hidden information) the good or bad standards ofthe various carriers, so they are only willing to pay the average standard; therefore better standards will vanish from the market and the average will deteriorate.

The third important aspect ofthe knowledge intensity in the tourism processes-implied by the two first aspects-is the increasing importance of trust in the relations between the acting elements (Bouncken, 2000). Trust as the expectation that the tnisted will be able and willing to fulfil the positive expectation of the trustee is a social relationship. The trusted may be an individual, then we speak of personal trust, or an institution, where we speak of institutional trust (Luhtnann, 1989). There is a third kind of trust, the ontological trust (Bohtne, 1998), which means the reliance on one’s own cognitive maps, built up by experience. The ability to give and take trust-to be trusted and to be a trustee-is an individual attribute and is acquired in the process of socialization (in the general meaning of Piaget, 1979: 88). The knowledge intensive services and relations in the tourism industry need trust, because the exchanged goods underlie asymmetric information. These trustful relations either personal or institutional-can only be established over tine. The high speed of the infonnation transfer processes is compensated by the low speed ofthe trust building processes. Only within existing trustful relations will the advantages of the high speed information processes produce the economic gains expected from them. Therefore the known and trusted partners will be the basis for the economic success in the tourism industry and trust as a part ofthe implicit knowledge (Polanyi, 1966) of persons and organizations will be a core competence in this industry. This is valid for the B2B relations in the touristn industry and applies too for travelers who don’l want to be surprised by unexpected qualities of the services. For the travelers very often instead of personal experience the source of trust is the reputation of agencies, operators or carriers or the persotial recotntnendation by trusted friends. The latter case could be called a “second order” trust, which is quite necessary in the touristn industry, because the travellers normally have no tegular and much repeated relations with the travel agencies or the other partners in the tourism system.