Ederer and Stremitzer, ‘Promises and Expectations’

Abstract:
We investigate why people keep their promises in the absence of external enforcement mechanisms and reputational effects. In a controlled economic 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 document for the first time that a promisor’s aversion to disappoint the 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.

Ederer, Florian and Stremitzer, Alexander, Promises and Expectations (December 16, 2013). Cowles Foundation Discussion Paper No. 1931.

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