Network Formation and Trust

Abstract

This dissertation is on trust problems and the emergence of social structures due to trust problems. Trust problems occur in many social and economic exchanges. Word-of-mouth networks and online reputation systems facilitate trust and make exchange possible that would otherwise be inhibited. Therefore, actors may establish such social structures for information sharing to overcome trust problems. This dissertation presents game-theoretic models for an integrated analysis of investments in and returns on social structures for information sharing as well as experimental tests of implications of these models. The dissertation shows when it is worthwhile for actors to invest in information sharing and that it is not at all obvious that actors invest in information sharing in an optimal manner. It is also shown that, as an unintended consequence, information sharing can lead to inequalities between interaction partners: once there is positive information on a few partners, actors exclude others from exchange as they would incur risks when giving others a chance to show whether they are trustworthy, too.