Promise keeping and reliance damage

Sengupta, Arjun; Vanberg, Christoph

Abstract

This paper experimentally investigates the hypothesis that promise-keeping behavior is affected by the "reliance damage" that a counterpart would suffer as a result of a breach. Reliance damage is defined as the difference between the counterfactual benefit that the counterpart would have obtained had they not relied on the promise and that which they would obtain following a breach. We discuss two motivational mechanisms that could drive such an effect. One is that people intrinsically dislike causing reliance damage per se. The other is that people dislike causing regret in another person. We experimentally test these ideas in the context of an experimental trust game. Our evidence is consistent with the hypothesis that promise keeping is affected by reliance damage, and that the underlying mechanism involves a desire not to cause regret in others.

Citation

Sengupta, A., & Vanberg, C. (2023). Promise keeping and reliance damage. European Economic Review, 152, Article 104344. https://doi.org/10.1016/j.euroecorev.2022.104344

• Journal Article Type: Article
• Acceptance Date: Oct 15, 2022
• Online Publication Date: Nov 21, 2022
• Publication Date: 2023-02
• Deposit Date: Nov 28, 2022
• Publicly Available Date: Nov 22, 2024
• Journal: European Economic Review
• Print ISSN: 0014-2921
• Electronic ISSN: 1873-572X
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 152
• Article Number: 104344
• DOI: https://doi.org/10.1016/j.euroecorev.2022.104344
• Keywords: Promises; Obligations; Opportunity costs; Regret Trust
• Public URL: https://nottingham-repository.worktribe.com/output/14306864
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0014292122002240
• Additional Information: This article is maintained by: Elsevier; Article Title: Promise keeping and reliance damage; Journal Title: European Economic Review; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.euroecorev.2022.104344; Content Type: article; Copyright: © 2022 Elsevier B.V. All rights reserved.