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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)

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    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.

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    File URL: http://dx.doi.org/10.1287/mnsc.1100.1279
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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 57 (2011)
    Issue (Month): 2 (February)
    Pages: 393-412

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    Handle: RePEc:inm:ormnsc:v:57:y:2011:i:2:p:393-412
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    1. Ariel Rubinstein, 1997. "Finite automata play the repeated prisioners dilemma," Levine's Working Paper Archive 1639, David K. Levine.
    2. 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.
    3. Adam Brandenburger, 1992. "Knowledge and Equilibrium in Games," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 83-101, Fall.
    4. Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, vol. 63(5), pages 1161-80, September.
    5. Michael Suk-Young Chwe, 2000. "Communication and Coordination in Social Networks," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 1-16.
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