CFDP 1931

Promises and Expectations

Author(s): 

Publication Date: December 2013

Update Date: March 2016

Pages: 33

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 that the promise will be kept) leads to a significant change in promisor behavior. We provide clean evidence that a promisor’s aversion to disappointing a promisee’s expectation leads her to keep her promise. We propose a simple theory of lexicographic promise keeping that is supported by our results and nests the findings of previous contributions as special cases.

Keywords: 

Promises, Expectations, Beliefs, Contracts

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