Assignment 2

1. + Assignment 2

2. Course aim knowledge about concepts in network theory, and being able to apply that knowledge

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

4. Trust A journey into social psychology, sociology and experimental economics

5. Often, trust is a key ingredient of a tie • Alliance formation • Friendship formation • Knowledge sharing • Cooperative endeavours • ... Trust

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”

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

8. Ourflavor:The Trust Game as the measurement vehicle

9. Ego characteristics: trustors Note: results differ somewhat depending on which kind of trust you are interested in. • Gentleandcooperativeindividuals • Blood donors, charitygivers, etc • Non-economists • Religiouspeople • Males • ...  Effectstendtoberelatively small, or at leastnotsystematic

10. Alter characteristics: some are trusted more • Appearance • Nationality We tend to like individuals from some countries, not others.

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

12. Alter characteristics: some are trusted more • Nationality

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

14. The effect of payoffs on behavior

15. P P S T R R The Trust Game – general format S < P < R < T

16. P P S T R R Trust Games: utility transformations

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

18. Trust shows all the signs of what is generally called the “disposition effect”

19. Example applications to alliance networks Take as giventhatfirms (have to) trust eachother. Then trust research suggests, forinstance: • It is notsomuchthatfirmsthemselvestendtodiffer "bynature" in the extenttowhichthey trust eachother. • Dealingwithovercomingopportunisticbehaviormightbedifficult, giventhatpeople are relativelypoor at using the otherparties incentives topredicttheirbehavior. • Dealingsbetweenfirmsfromcountrieswith low trust, needtoinvest more in safeguarding the transaction.

20. To do • Read and understand the trust paper online (it’s exam material)