Document Type

Discussion Paper

Publication Date

12-1-2013

CFDP Number

1931R

CFDP Revision Date

2017-11-01

CFDP Update Date

2016-03-01

CFDP 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.

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