Promises and endogenous reneging costs

Yuval Heller, David Sturrock

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We present a novel mechanism that explains how nonenforceable communication about future actions has the capacity to improve efficiency. We explore a two-player partnership game where each player, before choosing a level of effort to exert on a joint project, makes a cheap talk promise to his partner about his 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 costs induce second-best optimal outcomes.

Original languageEnglish
Article number105024
JournalJournal of Economic Theory
Volume187
DOIs
StatePublished - May 2020

Bibliographical note

Publisher Copyright:
© 2020 Elsevier Inc.

Keywords

  • Input games
  • Lying costs
  • Partnership games
  • Promises
  • Strategic complements

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