Circles of Trust

Posted: 9 Jan 2011 Last revised: 30 Apr 2013

See all articles by Samuel Lee

Samuel Lee

Santa Clara University - Leavey School of Business; European Corporate Governance Institute (ECGI); Swedish House of Finance

Petra Persson

Stanford University; Research Institute of Industrial Economics (IFN)

Date Written: January 6, 2011


We study strategic transmission of rival information among individuals who have altruistic relations. Information sharing naturally takes the form of word-of-mouth communication. Yet, the social forces that promote communication can also undermine it. Contrary to conventional wisdom, larger social networks may spread information less, and better-connected individuals may receive less information. Therefore, when forming networks, individuals cluster into groups that share information and trust by limiting connections as a commitment to secrecy.

Keywords: Information transmission, communication, social networks, directed altruism, trust, secrecy, network formation

JEL Classification: C72, D00, D64, D83, O31

Suggested Citation

Lee, Samuel and Persson, Petra, Circles of Trust (January 6, 2011). Available at SSRN: or

Samuel Lee (Contact Author)

Santa Clara University - Leavey School of Business

500 El Camino Real
Santa Clara, CA California 95053
United States

European Corporate Governance Institute (ECGI) ( email )

B-1050 Brussels

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm

Petra Persson

Stanford University ( email )

Stanford, CA 94305
United States

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15

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