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Promises, Reliance, and Psychological Lock-In

Rebecca Stone and Alexander Stremitzer

The Journal of Legal Studies, 2020, vol. 49, issue 1, 33 - 72

Abstract: We obtain experimental evidence that suggests that promisors are more likely to keep promises the more they were relied on by a promisee; that this effect is anticipated by promisees, who accordingly strategically overinvest to lock promisors into keeping their promises (psychological lock-in); and therefore that legal enforcement can reduce overinvestment as promisees do not need to make use of the extralegal mechanism of psychological lock-in when the legal regime induces promisors to perform instead. These results contrast with the central prediction of the holdup literature that underinvestment results in the absence of legal enforcement.

Date: 2020
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