Promises and Expectations

37 Pages Posted: 18 Dec 2013 Last revised: 9 Jan 2018

Florian Ederer

Yale School of Management; Yale University - Cowles Foundation

Alexander Stremitzer

ETH Zurich

Date Written: October 12, 2017

Abstract

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) leads to a significant change in promisor behavior. We provide evidence that a promisor's aversion to disappointing a promisee's expectation leads her to behave more generously. We propose and estimate a simple model of conditional guilt aversion that is supported by our results and nests the findings of previous contributions as special cases.

Keywords: Promises, Expectations, Beliefs, Contracts

JEL Classification: A13, C91, D03, C72, D64, K12

Suggested Citation

Ederer, Florian and Stremitzer, Alexander, Promises and Expectations (October 12, 2017). 106 Games and Economic Behavior 161-178 (2017); Cowles Foundation Discussion Paper No. 1931; UCLA School of Law, Law-Econ Research Paper No. 17-19. Available at SSRN: https://ssrn.com/abstract=2368941 or http://dx.doi.org/10.2139/ssrn.2368941

Florian Ederer (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States

HOME PAGE: http://faculty.som.yale.edu/florianederer/

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Alexander Stremitzer

ETH Zurich ( email )

Haldeneggsteig 4
Zurich, 8092
Switzerland
+41 (44) 632 40 08 (Phone)

HOME PAGE: http://www.lawecon.ethz.ch/people/stremitzer.html

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