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Like the title says, I want to know what the word/expression for "practice/habit of giving false hope" is. The context is, for example, the owner of a factory who doesn't want to pay his employees. So the sentence is like:

The owner is a master of giving false hope to his employees when the discussion comes to increment of the salary.

The highlighted part should be replaced by the expression. By the way, is "false hope" even an understandable phrase?

2

Is false hope an understandable phrase? It sure is, and it's quite recognizable, too, with much thanks to Paul Simon for that.

According to Wikipedia, it "refers to a hope based entirely around a fantasy or an extremely unlikely outcome."

A related phrase – raising hopes – is used to when something makes people more hopeful about a situation. When those hopes are unlikely to be realized, the phrase raising false hopes is sometimes used, as in:

Some clinics have already been accused of raising false hopes through false advertising or making false claims about success rates (from the book Gene Technology and Social Acceptance by W.P. Von Wartburg and J. Liew)

but even raising hopes can be used by itself (without the word false) when the context clearly indicates that the hopes are tenuous, if not misleading, as in this example:

Politicians are often accused of raising hopes, which they know full well cannot be brought to fruition (from a 1976 article in New Scientist)

As for a single word to express giving false hopes, the verb tantalize comes pretty close, which Macmillan defines as:

to make someone feel excited by showing or offering them something that they want, often with no intention of giving it to them

The word has an interesting origin, being derived from the Greek mythology character Tantalus, who was "punished in the afterlife by being made to stand in a river up to his chin, under branches laden with fruit, all of which withdrew from his reach whenever he tried to eat or drink." As such, the notion of false hope is certainly embedded in the word.

The noun form is tantalizer, so, getting back to your original question, one could say:

The owner is a tantalizer when the discussion comes to salary increases.

although I think it might sound more natural to use the word as a verb:

The owner tantalizes his employees when discussing salary increases.

2

As a phrase you could say

He is leading them on (to lead 'someone' on)

Although this is often used to also describe when someone is flirting with someone else whilst having no intentions to make a relationship.

1

Some possible wordings are shown below.

The owner is a master of soft-soaping his employees when the discussion ...
The owner is a master of cajoling his employees when the discussion ...
The owner is a master of inveigling his employees when the discussion ...
The owner is a master of blandishing his employees when the discussion ...
The owner is a master of blandishment when the discussion ...
The owner is a master of sham when the discussion ...
The owner is a master of blarney when the discussion ...
The owner is a master of flattery when the discussion ...

The above are based on meanings like the following.
soft-soap, “To attempt to persuade by flattery or pleasing words”
cajole, “To persuade someone to do something which they are reluctant to do, often by flattery; to coax”
inveigle, “to convert, convince or win over with flattery or wiles”
blandish, “To persuade someone by using flattery; to cajole” or “To praise someone dishonestly; to flatter or butter up”
sham, “Trickery, hoaxing”
blarney, “Persuasive flattery or kind speech. The ability to tell a man to go to hell, in such a way as he will look forward to the trip”
flattery, “Excessive praise or approval, which is often insincere and sometimes contrived to win favour.”

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There are several terms:

  • deceive — To cause to believe what is not true;
  • mislead — To lead into error of thought or action, especially by intentionally deceiving.

So the phrase would look like:

The owner is a master of deception when the discussion comes to increment of the salary.

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