Norm-Based Enforcement of Promises

Abstract

There is ample evidence that people are internally motivated to keep their promises. However, it is unclear whether promises alone create a meaningful level of commitment in many economically relevant situations where the stakes are high. In a between-subject design, we ask subjects to imagine they observed as third parties a promisor breaking her promise and could punish the promisor, at a cost to themselves, for her behavior. Our results suggest that the motivations third parties have to punish promise breakers have the same structure as the moral motivations of those deciding whether or not to keep their promises. That is, the same moral reasons that motivate promisors to keep their promises make third-party observers more likely to punish promise breaking. This suggests that the determinants of promise-keeping behavior will also drive non-legal enforcement mechanisms in relational contract settings and situations where third parties can punish promisors in a decentralized fashion, such that the moral forces of promise keeping can generate commitment even when the stakes are high.

Keywords: promises, norms, first-party enforcement, second-party enforcement, altruistic punishment

JEL Classification: K12, L14, D86, D91, C91