Private Law Theory

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.

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Rebecca Stone and Alexander Stremitzer, Promises, Reliance, and Psychological Lock-In, Journal of Legal Studies, volume 49, number 1 (January 2020).

First posted 2020-06-24 16:06:05