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You Are Who Your Friends Are: An Experiment on Trust and Homophily in Friendship Networks

Author

Listed:
  • Fabian Winter

    (Max-Planck Institute of Economics, Jena)

  • Mitesh Kataria

    (Max-Planck Institute of Economics, Jena)

Abstract

We study the existence of homophily (i.e. the tendency for people to make friends with people who are similar to themselves) with respect to trustworthiness. We ask whether two friends show similarly trustworthy behavior towards strangers, and whether this is anticipated by outsiders. We develop a simple model of bayesian learning in trust games and test the derived hypotheses in a controlled laboratory environment. In the experiment, two trustees sequentially play a trust game with the same trustor, where the trustees depending on treatmen are either friends or strangers to each other. We affirm the existence of homophily with re- spect to trustworthiness. Trustors' beliefs about the trustees' trustfulness are not affected by the knowledge about the (non-)existent friendship between the trustees. Behaviorally, however, they indirectly reciprocate the (un-)trustworthy behavior of one trustee towards his/her friends in later interactions.

Suggested Citation

  • Fabian Winter & Mitesh Kataria, 2013. "You Are Who Your Friends Are: An Experiment on Trust and Homophily in Friendship Networks," Jena Economic Research Papers 2013-044, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2013-044
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    social networks; homophily; trust; friendship; indirect tit-for-tat;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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