Promises, Reliance, and Psychological Lock-In
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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.
Recommended Citation
Stone, Rebecca and Stremitzer, Alexander
(2020)
"Promises, Reliance, and Psychological Lock-In,"
Journal of Legal Studies: Vol. 49:
No.
1, Article 2.
Available at:
https://chicagounbound.uchicago.edu/jls/vol49/iss1/2