The Pursuit of Power Corrupts

Abstract

Across three laboratory studies, this paper illustrates how a common strategic decision aimed at increasing one’s own power—investing in outside options—can lead to opportunistic behavior in exchange relationships. We show that the extent to which individuals have invested in creating outside options increases the likelihood that they will exploit their current exchange partners, even after controlling for the leverage provided by the outside options. Our results demonstrate that having previously sunk investments in an outside option leads to a heightened sense of entitlement, even when the outside option has been foregone. In turn, feelings of entitlement result in higher aspirations for what is to be gained in the current relationship, and these aspirations fuel opportunism. Finally, we show that other parties may fail to anticipate these effects, leaving them vulnerable to exploitation.