Why People Keep Their Promises?

Why Do People Keep Their Promises? An Experimental Test of Two Explanations Author(s): Christoph Vanberg Source: Econometrica, Vol. 76, No. 6 (Nov., 2008), pp. 1467-1480 Published by: The Econometric Society Stable URL: http://www.jstor.org/stable/40056512 . Accessed: 09/08/2011 00:21
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Vol. 76, No. 6 (November,2008), 1467-1480 Econometrica,

WHY DO PEOPLE KEEP THEIR PROMISES?AN EXPERIMENTAL TEST OF TWO EXPLANATIONS1 By Christoph Vanberg
Numerous psychologicaland economic experimentshave shown that the exchange of promisesgreatlyenhancescooperativebehaviorin experimentalgames. This paper seeks to test two theories to explainthis effect. The first posits that individualshave a preferencefor keepingtheirword.The second assumesthat people dislikeletting down others' payoff expectations.Accordingto the latter account, promises affect behavior only indirectly,because they lead to changes in the payoff expectationsattributedto others. I conduct anexperimentdesigned to distinguishbetween and test these alternative explanations.The results demonstrate that the effects of promises cannot be accountedfor by changesin payoffexpectations.This suggeststhat people have a preference for promisekeeping per se. Keywords: Promises,contracts,obligations,guilt aversion,beliefs, behavioraleconomics,experimentaleconomics.

1. INTRODUCTION

Numerouspsychological and economic experiments have shown that pre-playcommunication,especiallythe exchangeof promises,has profoundeffects on subsequentlevels of cooperationin experimentalgames (Bicchieriand Lev-On (2007), Charnessand Dufwenberg(2006), Ellingsen and Johannesson (1994), Ostrom, Walker,and Gardner (2004), Kerr and Kaufmann-Gilliland This evidence has led many authors to conclude that (1992),Sally (1995)). promisesinduce emotional commitmentsto fulfillcontractualobligations,perhaps based on a norm of promise keeping (Braver (1995), Ostrom, Walker, and Gardner (1992), Ellingsen and Johannesson (2004)). A formalizationof this idea was suggested by Ellingsen and Johannesson (2004), who proposed a model of social preferences that includes a "taste (...) for keeping one's word."2I willrefer to this as the commitment-based explanation for promise Its defining feature is the notion that agents are directlyconcerned, keeping. not only about the expected consequences of their behavior,but also about its consistencywith obligationsbased on agreementsor contracts. An alternativeexplanationfor promisekeeping is based on the theoryof guilt aversion(Dufwenbergand Gneezy (2000),Battigalliand Dufwenberg(2007)). This theory assumes that humanbehaviorin varioussocial contexts is affected
ll thankthe editor and three anonymousreferees for helpfulcommentsand suggestions.I also benefited from discussionswith Urs Fischbacher,WernerGueth, Oliver Kirchkamp, Topi Miettinen, BirendraRai, OndrejRydval,and Anthony Ziegelmeyer.SaschaBrose providedvaluable and assistancein programmingconductingexperimentalsessions. 2Similarmodels have been proposed by, among others, Klein and O'Flaherty (1993) and Miettinen(2008). © 2008 The EconometricSociety DOI: 10.3982/ECTA7673

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CHRISTOPHVANBERG

by a basic dispositionto experienceguilt when letting down the payoffexpectations attributedto others. In a recent paper, Charnessand DufWenberg (2006) argued that such a disposition may...