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Circles of Trust

Posted: 9 Jan 2011 Last revised: 30 Apr 2013

Samuel Lee

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

Petra Persson

Stanford University; Research Institute of Industrial Economics (IFN)

Date Written: January 6, 2011

Abstract

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: https://ssrn.com/abstract=1736200 or http://dx.doi.org/10.2139/ssrn.1736200

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 )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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
Sweden

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