Promises and Expectations
37 Pages Posted: 18 Dec 2013 Last revised: 9 Jan 2018
Date Written: October 12, 2017
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: Suggested Citation