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Promises and Expectations

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  • Florian Ederer
  • Alexander Stremitzer

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.
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Suggested Citation

  • Florian Ederer & Alexander Stremitzer, 2014. "Promises and Expectations," Levine's Working Paper Archive 786969000000000887, David K. Levine.
  • Handle: RePEc:cla:levarc:786969000000000887
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    References listed on IDEAS

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    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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