TU/e - 0ZM05/0EM15/0A150 1

+

Assignment 2

TU/e - 0ZM05/0EM15/0A150 2

Course aim

knowledge about concepts in network theory, and being able to apply that knowledge

TU/e - 0ZM05/0EM15/0A150 3

The setup in some more detail

Network theory and background

- Introduction: what are they, why important …- Network properties (and a bit on trust)- Four basic network arguments- Kinds of network data (collection)- Personal networks- Business networks- Patent networks

TU/e - 0ZM05/0EM15/0A150 4

Trust

A journey into social psychology, sociology and experimental economics

TU/e - 0ZM05/0EM15/0A150 5

Often, trust is a key ingredient of a tie

- Alliance formation- Friendship formation- Knowledge sharing- Cooperative endeavours- ...

TU/e - 0ZM05/0EM15/0A150 6

Trust

Working definition: handing over the control of the situation to someone else, who can in principle choose to behave in an opportunistic way

“the lubricant of society: it is what makes interaction run smoothly”

Example: Robert Putnam’s“Bowling alone”

TU/e - 0ZM05/0EM15/0A150 7

Different trust flavors…

Trust in a specific other Trust in a general other Trust in a brand / institution / society / politics / … Trust in competence or ability vs trust in

preference “existential trust” Trust as a belief or trust as a behavior

TU/e - 0ZM05/0EM15/0A150 8

Our flavor:The Trust Game as the measurement vehicle

TU/e - 0ZM05/0EM15/0A150 9

Ego characteristics: trustors

Gentle and cooperative individuals Blood donors, charity givers, etc Non-economists Religious people Males ...

Effects tend to be relatively small, or at least not systematic

Note: results differ somewhat depending

on which kind of trust you are interested in.

TU/e - 0ZM05/0EM15/0A150 10

Alter characteristics: some are trusted more

Appearance

NationalityWe tend to like individuals from some countries, not others.

TU/e - 0ZM05/0EM15/0A150 11

Alter characteristics: some are trusted more

Appearance

- we form subjective judgments easily...- ... but they are not related to actual behavior

- we tend to trust:+pretty faces+average faces

+faces with characteristics similar to our own

TU/e - 0ZM05/0EM15/0A150 12

Alter characteristics: some are trusted more

Nationality

TU/e - 0ZM05/0EM15/0A150 13

Some results on trust between countries

There are large differences between countries: some are trusted, some are not

There is a large degree of consensus within countries about the extent to which they trust other countries

Inter-country trust is symmetrical: the Dutch do not trust Italians much, and the Italians do not trust us much

TU/e - 0ZM05/0EM15/0A150 14

The effect of payoffs on behavior

TU/e - 0ZM05/0EM15/0A150 15

The Trust Game – general format

P P

S T

R R

S < P < R < T

TU/e - 0ZM05/0EM15/0A150 16

Trust Games: utility transformations

P P

S TR R

TU/e - 0ZM05/0EM15/0A150 17

The effect of payoffs on behavior

Trustworthy behavior: temptation explains behavior well

Trustful behavior: risk ((35–5)/(75–5)) explains behavior well, temptation ((95–75)/(95–5)) does not

People are less good at choosing their behavior in interdependent situations such as this one

Nevertheless: strong effects of the payoffs on trustful and trustworthy behavior

TU/e - 0ZM05/0EM15/0A150

Trust shows all the signs of what is

generally called the

“disposition effect”

18

TU/e - 0ZM05/0EM15/0A150 19

Example applications to alliance networks

Take as given that firms (have to) trust each other. Then trust research suggests, for instance:

It is not so much that firms themselves tend to differ "by nature" in the extent to which they trust each other.

Dealing with overcoming opportunistic behavior might be difficult, given that people are relatively poor at using the other parties incentives to predict their behavior.

Dealings between firms from countries with low trust, need to invest more in safeguarding the transaction.

TU/e - 0ZM05/0EM15/0A150 20

To do

Read and understand the trust paper online (it’s exam material)