Trust and the dynamics of network formation

We evaluate the effect of reciprocal trust within pairs of individuals—gauged by total potential earnings in a trust experiment—on the probability of relationship formation, in comparison with well-known determinants of social ties, such as time of exposure and homophily along demographic traits. We measured trust and trustworthiness for every individual in an incoming cohort of undergraduate students before they began interacting. Using relationship data sourced from surveys and campus entry/exit times between one month and two years after the trust experiment, we find that reciprocal trust is neither a statistically nor an economically significant factor in determining the students’ social networks. Instead, time of exposure, prior acquaintance, and other demographic characteristics play important and persistent roles in relationship formation.