Recent research argues that “betrayal aversion” leads many people to avoid risk more when a person, rather than nature, determines the outcome of uncertainty. Unfortunately, previous studies conflate betrayal aversion with established preference effects, including loss aversion, raising many questions about the economic impact of betrayal aversion. This dissertation answers three of these questions: Does betrayal aversion actually negatively influence social exchange as past studies suggest? Why did evolutionarily successful societies evolve to have emotions that seem detrimental to mutually beneficial economic exchange? Can we design exchange institutions to mitigate negative but not beneficial aspects of betrayal aversion? The three chapters presented provide the first rigorous evidence on the adaptive benefits of betrayal aversion, helping explain the evolutionary stable presence of betrayal-averse agents. Additionally, the findings are the first to show that institutions can mitigate betrayal aversion without decreasing rates of reciprocation.