A Promise in the Name of God

Abstract

How do sellers signal product quality in weak contractual environments? Using hundreds of audio-recorded trade negotiations in Afghanistan, we document that sellers often invoke God to reassure buyers, particularly when product quality is difficult to verify and when they lack a fixed selling location, limiting reliance on reputation. We argue that these divine invocations function as a signaling device, as making a false claim under them is believed to entail cosmic costs. Evidence from field experiments matches detailed predictions of a signaling model. Our findings indicate that religious beliefs can be actively employed to strengthen the credibility of verbal commitments.

Keywords: Weak institutions, Signaling, Asymmetric information, Trust, Religion, Cheap talk