Promises and Endogenous Reneging Costs

Yuval Heller and David Sturrock

MPRA Paper from University Library of Munich, Germany

Abstract: We present a novel theoretical mechanism that explains the capacity for non-enforceable communication about future actions to improve efficiency. We explore a two-player partnership game where, before choosing a level of effort to exert on a joint project, each player makes a cheap talk promise to their partner about their own future effort. We allow agents to incur a psychological cost of reneging on their promises. We demonstrate a strong tendency for evolutionary processes to select agents who incur intermediate costs of reneging, and show that these intermediate costs induce second-best optimal outcomes.

Keywords: Promises; lying costs; joint projects; input games; partnerships. (search for similar items in EconPapers)
JEL-codes: C73 D03 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-gth and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/90249/1/MPRA_paper_90249.pdf revised version (application/pdf)
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https://mpra.ub.uni-muenchen.de/92342/1/MPRA_paper_92342.pdf revised version (application/pdf)

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