Disentangling Embedded Ties: How Liking and Trust Influence Economic Partner Selection and Market Fraud

• In Event: 571 - Section on Economic Sociology Roundtables (one-hour)
  In Refereed Roundtable: Table 08. Networks among Firms and Economic Partners

Abstract

Individuals prefer economic partners with whom they have a pre-existing social relation, especially when faced with uncertainty and risk. Selecting counterparts one trusts provides a means of mitigating risk, while selecting counterparts one likes provides social utility. We disentangle the roles of liking and trust and examine their distinct influences on economic partner selection and fraud in two experiments in which buyers and sellers had asymmetric access to information. Individuals selected partners whom they liked when risk in the market was low, but prioritized trust when risk was high. Paradoxically, when vulnerable buyers selected partners whom they trusted, it did not insulate them from being defrauded. High betweenness centrality in the liking network protected buyers from fraud, indicating that structural characteristics rather than dyadic relations serve as social insurance against fraud.

Authors

• Brandy Aven, Carnegie Mellon University

• Taya Cohen, Carnegie Mellon University

• Jin Wook Chang, Carnegie Mellon University