CFDP 1931R

Author(s): 
CFDP Title: 

Promises and Expectations


Publication Date: 

December, 2013


Revision Date: 

November, 2017


Pages: 

37



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