This thesis examines whether a control system can induce cooperative decisions and then help develop trust among pairs of partners in making decisions regarding resource contribution to a joint project. It also explores the role of in-group favoritism in the above relationships. A 2 (strong control system vs. no control system) x 2 (paired with an in-group member vs. paired with an out-group member) between-subjects design is adopted to examine these issues in a prisoner’s dilemma setting. Seventy eight graduate students participate in a computerized experiment and are asked to make 20 periods of decisions on the level of resource they will devote to a joint project of which the outcome is jointly determined by himself (herself) and the paired partner. After 20 periods of decisions, they make another 20 periods of decisions, all without the existence of any control system. The results show that a strong control system can induce the participants’ cooperative behavior. The observed cooperation mediates the relationship between control system and trust. The trust built in the previous periods induces trust in the subsequent periods. In addition, in-group favoritism has positive effects on cooperative behavior and on the build up of trust. Further, in-group favoritism moderates the mediating effect of cooperation on the association between control system and trust. Limitations and implications are discussed.