Going back on a promise, contract, or bargain. This may be motivated by opportimism: once the other party is committed to an irrevocable action there is a temptation to renege if it is profitable. In judging whether to renege it is necessary to weigh the short-term gains against the long-term losses (from retaliation, punishment, or loss of reputation). General freedom to renege would make impossible many economically efficient contracts, for example those concerning loans and career choice. One role of the legal system is to reduce the extent of reneging. The legal system aims to ensure that the terms of contracts are satisfied, and when they can be verified to have been broken, to ensure that compensation is paid to the injured party.
|Reference: Oxford Press Dictonary of Economics, 5th edt.|