Structural balance emerges and explains performance in risky decision-making
We learned in class that social networks with positive and negative ties tend towards triads with one of two states of structural balance. One of these states has one positive tie and one negative tie, since two nodes can be friends with the same enemy. Another state has all positive ties, as three people can be friends. However, a study published on nature.com shows that this tendency to go towards structural balance is not limited to social networks. They analyzed a financial institution with 66 day traders over a two-year period to observe the ties between the traders. A positive tie was one between two traders that were friends or supporters, while negative ties were ones that between two traders that were foes or competitors. These ties were measured by using the text messages that were sent between the traders.
The study compared the network of the traders to a randomized network with positive and negative ties and found that the network of the traders was a lot more balanced than the randomized one. This is not surprising because people would likely continue making new connections and changing connections until they reach one of the balanced states. However, the study also found that triads in structurally balanced states performed better than those in unbalanced states. Balance was significantly positively correlated to the profit that the traders made. The change from medium to high balance was associated with a 30% increase in profits. This observation shows that structurally balanced networks are not only what networks tend to move towards, they are also what is usually optimal for a network’s well-being.
Source: https://www.nature.com/articles/s41467-019-10548-8