Rationality, fairness and the cost of distrust

► An adapted version of “the trust game with revenge” is applied to a Swedish setting. ► Results differ from previous research in the sense that the share of endowments sent in the first stage is much higher, and we almost find no effect of the threat of punishment. ► An efficiency frontier is defined and results show that that only 25% of the outcomes reach this frontier due to lack of trust. ► Receivers return more than senders expect, so for the most part the lack of trust is unwarranted.