This paper is light, but has some key points that are important in considering build out of a social network.

Claudia Keser: Reputation management, or a reputation system, is a way to maintain trust in online communities, where we anonymously interact with people that we might have never met, not even heard of, and that we might never meet again. This is achieved by the provision of information about past performance. To be somewhat more precise, [with] a definition given by Paul Resnick et al., it is a system that collects, distributes and aggregates feedback about past behavior.

A famous example is eBay’s Feedback Forum, where after each transaction the parties involved may evaluate each other. Such a reputation system plays a double role. The first is to enable trade by making trade safer and increasing participants’ trust. The second role is in promoting satisfactory trade and increasing participants’ trustworthiness.

Source: IBM Reputation management: Building trust among virtual strangers – Executive technology reports

Her key points:

Executive summary – Trust is essential to efficient business activities, but it doesn’t come naturally in an online environment. By setting up the right systems of feedback and ratings, it’s possible to create environments  where participants feel safe to buy, sell and work together.

• Feedback is a public good; to speak like an economist, users have an incentive to take a free ride on the evaluations given by others. I believe I’ve read somewhere that about 50 percent of the traders provide feedback.
• We observe hardly any negative comments, less than 1 percent, I think. The major reason might be fear of retaliation. A seller might punish a buyer who gave him a negative evaluation by doing the same, whether justified or not. To date, eBay uses a unique feedback rating number, aggregating information received both as buyer and seller, although the verbal comments are split up.
• Strategic behavior is hard to detect. For example, since the ratings are not weighted by monetary importance of the transaction, it is easy to build up a positive reputation by buying or selling a large number of cheap items, maybe even trade with friends, then boom, come up with very expensive items to sell … and not deliver.