Snijders_ETH_Mar17_08_2

8/3/2019 Snijders_ETH_Mar17_08_2

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Part 1 Trust


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Trust is a Honda Accord

As opposed to:

"Existentialist trust"

Reliance on ...


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Trust

W

orking definition: handing over the control of the situationto someone else, who can in principle choose to behave inan opportunistic way

the lubricant of society: it is what makes interaction runsmoothly

Example:

Robert Putnams

Bowling alone


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The Trust Game as the measurement vehicle


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The Trust Game general format

P P

S T

R R

S < P < R < T


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The Trust Game as the measurement vehicle


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Ego characteristics: trustors

Gentle and cooperative individuals

Blood donors, charity givers, etc

Non-economists

Religious people

Males ...

Effects tend to be relatively small, or at least not

systematic

Note: results differsomewhat depending

onwhich kind of

trust youare

interested in.


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Alter characteristics: some are trusted more

Appearance

Nationality

We tend to like individuals from some countries,not others.


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Appearance

- we form subjective judgments easily...

- ... but theyare not related to actual behavior

- we tend to trust:

+pretty faces

+average faces

+faces with characteristics similar to our own


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Nationality


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Some results on trust between countries

There are large differences between countries:some are trusted, some are not

There is alarge degree of consensus withincountries about the extent to which they trustother countries

Inter-country trust is symmetrical: the Dutch donot trust Italians much, and the Italians do not

trust us much


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Trust has economic value (1)

trust betweenNLand other country

contract

length


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Trust has economic value (2)

trust betweenNLand other country

after-sales

problems


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The effect of payoffs on behavior


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Game theory: anyone?

Started scientifically with Von Neumann enMorgenstern

(1944: Theory of games

and economic behavior)

Nash Crowe

1950: John Nash (equilibrium concept). Nobel prizefor his work in 1994, together with Harsanyi enSelten.


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Trust Games: utility transformations

P P

S T

R R


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Next: experiment

let lots of people playlots of different kinds ofTrust Games with each other

(how do you do that?) Experimental economics

figure out what predicts behavior best: personalcharacteristics of ego, ofalter, or game-characteristics


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The effect of payoffs on behavior

Trustworthy behavior: temptation explainsbehavior well

Trustful behavior: risk ((355)/(755)) explainsbehavior well, temptation ((9575)/(955)) does not

People are less good at choosing their behavior ininterdependent situations such as this one

Nevertheless: strong effects of the payoffs ontrustfuland trustworthy behavior


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Solving the trust problem

Norms

Changing the incentive structure (sanctions /"hostages")

Repetition

(cf. Robert Axelrod "The evolution of cooperation")


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Part 2 - Small world networks

The way in which people are embedded in anetwork of connections might affect, or evencompletely determine, their behavior

NOTE

- Edge of network theory

- Not fully understood yet

- but interesting findings


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The network perspective

Two firms in the same market.

Which firm performs better (say, is more innovative):

A or B?

A B

This depends on:

Cost effectivenessOrganizational structure

Corporate culture

Flexibility

Supply chain management


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The network perspective

Two firms in the same market.

Which firm performs better (say, more innovative): A or B?

AND POSITION IN THE NETWORK OF FIRMS

A B

Note

Networks are one specific way of dealing with

market imperfection


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Example network (source: Borgatti)


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Example network: a food chain


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Example network: terrorists (source: Borgatti)


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Kinds of network arguments(from: Burt)

Closure competitive advantage stems from managing risk; closednetworks enhance communication and enforcement of sanctions

Brokerage competitive advantage stems from managinginformation access and control; networks that span structural holesprovide the better opportunities

Contagion information is not a clear guide to behavior, soobservable behavior of others is taken as a signal of properbehavior.

[1] contagion by cohesion: you imitate the behavior of thoseyou are connected to

[2] contagion by equivalence: you imitate the behavior of thoseothers who are in a structurally equivalent position

Prominence information is not a clear guide to behavior, so theprominence ofan individual or group is taken as a signal of quality


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The small world phenomenon Milgram s (1967) original study

Milgram sent packages to a couple hundred peoplein Nebraskaand Kansas.

Aim was get this package to

Rule: only send this package to someone whomyou know on a first name basis. Try to make thechain as short as possible.

Result: average length of chain is only sixsix degrees of separation


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Milgrams original study (2)

Is this really true?

It seems that Milgram used only part of thedata, actually mainly the ones supporting hisclaim

Many packages did not end up at the Bostonaddress

Follow up studies often small scale


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The small world phenomenon (cont.)

Small world projectis (was?) testing this assertion as wespeak (http://smallworld.columbia.edu), you might still beable to participate

Email to , otherwise same rules. Addresses were

American college professor, Indian technology consultant,Estonian archivalinspector,

Conclusions thusfar:

Low completion rate (around 1.5%)

Succesful chains more often through professional ties

Succesful chains more often through weak ties (weak tiesmentioned about 10% more often)

Chain size typically 5, 6 or 7.


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The Kevin Bacon experiment Tjaden (+/-1996)

Actors = actors

Ties = has played in a movie with

Small world networks:

- short average distance between pairs

- but relatively high cliquishness


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The Kevin Bacon game

Can be played at:http://oracleofbacon.org

Kevin Bacon

number

Jack Nicholson: 1 (A few good men)

Robert de Niro: 1 (Sleepers)

Rutger Hauer (NL): 2 [Jackie Burroughs]

Famke Janssen (NL): 2 [DonnaGoodhand]Bruce Willis: 2 [David Hayman]

Kl.M. Brandauer (AU): 2 [Robert Redford]

Arn. Schwarzenegger: 2 [Kevin Pollak]


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Connecting the improbable

32


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Bacon / Hauer / Connery


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The top 20 centers in the IMDB (2004?)

1. Steiger, Rod (2.67)2. Lee, Christopher (2.68)3. Hopper, Dennis (2.69)4. Sutherland, Donald (2.70)5. Keitel, Harvey (2.70)6. Pleasence, Donald (2.70)7. von Sydow, Max (2.70)8. Caine, Michael (I) (2.72)9. Sheen, Martin (2.72)10. Quinn, Anthony (2.72)11. Heston, Charlton (2.72)12. Hackman, Gene (2.72)13. Connery, Sean (2.73)14. Stanton, Harry Dean (2.73)15. Welles, Orson (2.74)16. Mitchum, Robert (2.74)17. Gould, Elliott (2.74)18. Plummer, Christopher (2.74)19. Coburn, James (2.74)20. Borgnine, Ernest (2.74)

NB Bacon is atplace 1049


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Elvis has left the building


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Strogatz and Watts

6 billion nodes on a circle

Each connected to 1,000 neighbors

Start rewiring links randomly

Calculate average path lengthand clusteringas the network starts to change

Network changes from structured to random APL: starts at 3 million, decreases to 4 (!)

Clustering: probability that two nodes linked to acommon node will be linked to each other (degreeof overlap)

Clustering: starts at 0.75, decreases to 1 in 6million

Strogatzand Wats asked: what happens along theway?


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Strogatz and Watts (2)We move in tight circlesyet we are all bound

together by remarkablyshort chains (Strogatz,2003)

Implications for, forinstance, AIDS research.


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We find small world networks in all kinds ofplaces

Caenorhabditis Elegans

959 cells

Genome sequenced 1998

Nervous system mapped

small world network

Power grid network ofWestern States

5,000 power plants with high-voltage lines

small world network


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Small world networks so what?

You see it alot around us: for instance in roadmaps, food chains, electric power grids,metabolite processing networks, neural networks,telephone call graphs and socialinfluencenetworks may be useful to study them

We (can try to) create them:

see Hyves, openBC, etc

They seem to be useful for alot

of things, or at least pop up often,

but how do they emerge?


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Combining game theory and networks Axelrod (1980), Watts & Strogatz (1998?)

1. Consider a given network.

2. All connected actors play the repeated Prisoners Dilemmafor some rounds

3. After a given number of rounds, the strategies reproducein the sense that the proportion of the more succesfulstrategies increases in the network, whereas the lesssuccesful strategies decrease or die

4. Repeat 2 and 3 untila stable state is reached.

5. Conclusion: to sustain cooperation, you need a shortaverage distance, and cliquishness (small worlds)


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How do these networks arise?

Perhaps through preferentialattachment

< show NetLogo simulation here>

Observed networks tend to follow a power-law.They have ascale-free architecture.


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The tipping point (Watts*)

Consider a network in which each node determines

whether or not to adopt (for instance the latestfashion), based on what his direct connections do.

Nodes have different thresholds to adopt

(random networks)

Question: when do you get cascades ofadoption?

Answer: two phase transitions or tipping points:

in sparse networks no cascades

as networks get more dense, a sudden jump inthe likelihood of cascades

as networks get more dense, the likelihood ofcascades decreases and suddenly goes to zero

* Watts, D.J. (2002) A simple model of global cascades on random networks. Proceedings of the National Academy ofSciences USA 99, 5766-5771


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Open problems and related issues ...

Decentralized computing

Imagine a ring of 1,000 lightbulbs

Each is on or off

Each bulb looks at three neighbors left and right...

... and decides somehow whether or not to switch to onor off.

Question: how can we design a rule so that the network cansolve a given task, for instance whether most of thelightbulbs were initially on or off.

- As yet unsolved. Best rule gives 82 % correct.- But: on small-world networks, a simple majority rule gets

88% correct.

How can local knowledge be used to solve global problems?


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Open problems and related issues (2)

Applications to

Spread of diseases (AIDS, foot-and-mouthdisease, computer viruses)

Spread of fashions

Spread of knowledge

Small-world networks are:

Robust to random problems/mistakes Vulnerable to selectively targeted attacks


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Application to trust

People (have to or want to) trust each other.

Whether or not this will work out, is dependent onthe context in which the interaction occurs thiscan be given a more concrete meaning: it is

dependent on in which kind of network theTrustGame is being played!

Dealing with overcoming opportunistic behavior isdifficult, given that people are relatively poor at

using the other parties incentives to predict theirbehavior. Perhaps it is better to make sure thatthe network you are in, deters opportunisticbehavior.

cf.eBay: reputation


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Possible assignment

For the programmers: have alook at the literatureon "games in networks".

Run a simulation where people are playing TrustGames on a network. Try to determine, for

instance, how network characteristics affectbehavior in Trust Games.

Take one other "soft topics" such as trust (regret?

envy? guilt?). Scan the literature forimplementations of that particular topic in termsofabstract games. Explain and summarize thefindings.

Snijders_ETH_Mar17_08_2

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