CFDP 1931R

Author(s): Florian EdererAlexander Stremitzer

Publication Date: December 2013

Revision Date: November 2017

Update Date: March 2016

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

JEL Classification Codes: A13C91D03C72D64K12