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The simplest social context for trust is an isolated dyad—two people away from others. The more usual context is two people surrounded by various close friends, foes, and acquaintances. We argue that third-party gossip amplifies both the positive and the negative in a relationship, making ego and alter more certain of their trust (or distrust) in one another. We draw three broad conclusions from an analysis of network data on a probability sample of diverse senior managers: (a) Trust is associated with relation strength, as expected in private games; (b) as predicted by the gossip argument for public games, trust is significantly amplified by third parties (third parties have a positive effect on trust within strong relations, and a negative effect on trust within weak relations); and (c) different forms of indirect connection are responsible for the third-party effects on trust.
Burt et al. (1995) studied this question.