The Cognitive Foundations of Tacit Commitments

Abstract

People often make, and are held to account for, purely tacit commitments in interactions with other people: commitments which have never been explicitly articulated or agreed. Moreover, unspoken, tacit commitments are often perceived as binding: people often stick to, and are expected to stick to, these commitments, even where it might seem against their interests to do so. These commitments have been widely seen as crucial underpinning for human collaboration and cooperation. Yet how do such commitments arise, and are they compatible with human rationality? This paper provides a formal, reasoning-based account of tacit commitments based on “virtual bargaining”—a mode of reasoning that joins elements of individualistic and collaborative reasoning. We complement existing accounts by showing that even purely self-interested individuals can, under certain conditions, tacitly commit to punishing counterparts who violate an unenforceable agreement, or to cooperating in the Centipede game and the finitely repeated Prisoner’s Dilemma game.

JEL Classification: C7, D81