The study examines the effect of outside options on trust and trustworthiness. Building on the logic of self-justification and escalation, it is hypothesized that parties who have invested in outside options will behave in a less trustworthy (and more self-serving) manner with their exchange...

Are individuals who trust others better off than those who do not? Do trustworthy people prosper more than untrustworthy ones? We first pose these questions in a search model where individuals face repeated choices between trusting (initiating an investment transaction) and not trusting, and...