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Promises and Expectations

37 Pages Posted: 18 Dec 2013 Last revised: 12 Oct 2017

Florian Ederer

Yale School of Management; Yale University - Cowles Foundation

Alexander Stremitzer

University of California, Los Angeles (UCLA) - School of Law

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). Games and Economic Behavior, Forthcoming; Cowles Foundation Discussion Paper No. 1931. 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

University of California, Los Angeles (UCLA) - School of Law ( email )

405 Hilgard Avenue
Box 90095-1476
Los Angeles, CA 90095-1476
United States

HOME PAGE: http://www.law.ucla.edu/faculty/all-faculty-profiles/professors/Pages/Alexander-Stremitzer.aspx

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