Promises and Expectations
Yale School of Management; Yale University - Cowles Foundation
UCLA School of Law
September 4, 2014
Cowles Foundation Discussion Paper No. 1931
We investigate why people keep their promises in the absence of external enforcement mechanisms and reputational effects. In a controlled laboratory experiment we show that exogenous variation of second-order expectations (promisors' expectations about promisees' expectations that the promise will be kept) leads to a significant change in promisor behavior. We provide clean evidence that a promisor's aversion to disappoint a promisee's expectation leads her to keep her promise. We propose a simple theory of lexicographic promise keeping that is supported by our results and nests the findings of previous contributions as special cases.
Number of Pages in PDF File: 33
Keywords: Promises, Expectations, Beliefs, Contracts
JEL Classification: A13, C91, D03, C72, D64, K12
Date posted: December 18, 2013 ; Last revised: September 5, 2014
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