Contracts make breach costly while promises invoke future distrust as sanction

Evidence

Contracts and promises represent weaker forms of pre-commitment, which do not altogether rule out certain actions, but simply make them more costly. Contract shifts the focus of trust on to the efficacy of sanctions, and either our or a third party’s ability to enforce them if a contract is broken. Promises are interesting in that the sanctions they imply may themselves take the form of trust: ‘When a man says he promises any thing, he in effect expresses a resolution of performing it; and along with that, by making use of this form of words, subjects himself to the penalty of never being trusted again in case of failure’ (Hume 1969: 574). — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2749

Categorization

• DEFINE: Useful distinction: contract vs. promise tier by sanction type — cost-raising versus reputational exclusion.