Trust, Reciprocity and the Strength of Social Ties: Evidence from an Economic Experiment in an Online Social Network

Abstract:     
We use an economic experiment to demonstrate that socially mediated trust levels are higher in online social networks, even though the notion of friendship formation in such networks is understood less than physical-world tie formation. We do so by designing a novel Facebook application to play a non-anonymous Investment Game that allows us to study the linkage between three different “strength of social ties” measures derived from users’ Facebook activity and an experimentally derived measure of trust. For the average user, we find that each additional “wall-post” made on a friend’s Facebook wall is associated with a 6.5% increase in trust. Similarly, we find that each additional photo in which two friends jointly appear (a signal of social affinity and physical world ties) is associated with a 2.3% increase in trust. Our study endogenously uncovers latent heterogeneity in Facebook users’ notion of friendship. For non-selective pairs of users, who are less selective in tie formation, we find that the shared friendships associated with their ties are do not predict trust. This provides the first evidence that traditional measures of dyadic-trust like embeddedness that are widely used in the analysis of physical world social networks do not directly carry over to online social networks. In contrast, both revealed preference style measures, which we obtain from the Facebook API, that capture dyadic interactions between users, as well as credible indicators of offline friendships, such as being tagged on a photograph together, are strongly predictive of trust for the average user. Methodologically, our study showcases how large-scale online social networks can serve as platforms that takes social science and experimental economics research that is traditionally done in the physical laboratory to real-world subjects in a highly generalizable setting. .

Number of Pages in PDF File: 32

Keywords: Social capital, social media, networks, echo hypothesis, reciprocal, investment game, strength of ties, trust, switching regression, Facebook experiment

working papers series