Promises and Expectations
Yale School of Management; Yale University - Cowles Foundation
UCLA School of Law
December 19, 2013
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 economic 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 document for the first time that a promisor's aversion to disappoint the 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: 29
Keywords: Promises, Expectations, Beliefs, Contracts
JEL Classification: A13, C91, D03, C72, D64, K12working papers series
Date posted: December 18, 2013 ; Last revised: December 19, 2013
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