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"I Think You Think I Think You're Lying": The Interactive Epistemology of Trust in Social Networks


  • Mihnea C. Moldoveanu

    () (Desautels Centre for Intregrative Thinking, Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • Joel A. C. Baum

    () (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)


We investigate the epistemology of trust in social networks. We posit trust as a special epistemic state that depends on actors' beliefs about each others' beliefs as well as about states of the world. It offers new ideas and tools for representing the core elements of trust both within dyads and larger groups and presents an approach that makes trust measurable in a noncircular and predictive, rather than merely postdictive, fashion. After advancing arguments for the importance of interactive belief systems to the successful coordination of behavior, we tune our investigation of trust by focusing on beliefs that are important to mobilization and coordination and show how trust functions to influence social capital arising from network structure. We present empirical evidence corroborating the importance of higher-order beliefs to understanding trust and the interactive analysis of trust to the likelihood of successful coordination. This paper was accepted by Jesper Sørensen, organizations and social networks.

Suggested Citation

  • Mihnea C. Moldoveanu & Joel A. C. Baum, 2011. ""I Think You Think I Think You're Lying": The Interactive Epistemology of Trust in Social Networks," Management Science, INFORMS, vol. 57(2), pages 393-412, February.
  • Handle: RePEc:inm:ormnsc:v:57:y:2011:i:2:p:393-412

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    References listed on IDEAS

    1. Robert Aumann & Adam Brandenburger, 2014. "Epistemic Conditions for Nash Equilibrium," World Scientific Book Chapters,in: The Language of Game Theory Putting Epistemics into the Mathematics of Games, chapter 5, pages 113-136 World Scientific Publishing Co. Pte. Ltd..
    2. Michael Suk-Young Chwe, 2000. "Communication and Coordination in Social Networks," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 1-16.
    3. Adam Brandenburger, 1992. "Knowledge and Equilibrium in Games," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 83-101, Fall.
    4. Moldoveanu, M. C. & Stevenson, H., 1998. "Ethical universals in practice: An analysis of five principles," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 27(6), pages 721-752.
    5. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
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    Cited by:

    1. Daske, Thomas, 2017. "Friends and Foes at Work: Assigning Teams in a Social Network," EconStor Preprints 172493, ZBW - German National Library of Economics.


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