Promises and expectations

We investigate why people keep their promises in the absence of external enforcement mechanisms and reputational e¤ects. 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 signi…cant 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 …ndings of previous contributions as special cases. Keywords: promises, expectations, beliefs, contracts JEL Classi…cation: A13, C91, D03, C72, D64, K12. We thank Mark Greenberg whose insightful comments in‡uenced the design of our experiment. We are also grateful to Jason Abaluck, Jennifer Arlen, Timothy Armstrong, Andreas Blume, Lorenzo Caliendo, Arthur Campbell, Gary Charness, Judy Chevalier, Martin Dufwenberg, Christoph Engel, Florian Englmaier, Constança Esteves-Sorenson, Craig Fox, Robert Gibbons, Phil Haile, Bård Harstad, Holger Herz, Lisa Kahn, Navin Kartik, Amanda Kowalski, Camelia Kuhnen, Rosario Macera Parra, Bentley MacLeod, Mush…q Mobarak, Barry Nalebu¤, Stefan Palan, Heikki Rantakari, Andreas Roider, Frédéric Schneider, Marta Serra Garcia, Seana Shi¤rin, Joel Sobel, Rebecca Stone, Shyam Sunder, Steven Tadelis, Nathan Yang, Noam Yuchtman, Kathryn Zeiler and seminar audiences at the Max Planck Institute for Research on Collective Goods, NYU, MIT, University of Regensburg, UCLA, Yale, ALEA, the NBER Summer Institute, the NBER Organizational Economics Meeting, the AEA 2015 meetings, and the UCSD Deception, Incentives and Behavior Conference for helpful comments and suggestions as well as Estela Hopenhayn and the California Social Science Experimental Laboratory (CASSEL) at UCLA for helping us to conduct the experiments. We also thank Sean Maddocks, James Davis, and Jaimini Parekh for excellent research assistance and the UCLA Faculty Research Grant Program for …nancial support. yYale School of Management, 165 Whitney Avenue, New Haven, CT 06511, ‡[email protected]. zUCLA School of Law, 385 Charles E. Young Drive, 1242 Law Building, Los Angeles, CA 90095, [email protected].