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In search of welfare-improving gifts

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Author Info

  • Kaplan, Todd R.
  • Ruffle, Bradley J.

Abstract

Gift giving is thought to decrease welfare. Recipients are sometimes stuck with gifts they would not have purchased because the giver does not perfectly know the recipient's preferences and in-kind gifts cannot be costlessly refunded. Such gifts are welfare reducing compared to giving cash if, in addition, recipients possess full information as to which stores carry their desired goods and the ability to reach these stores costlessly. We replace these two latter assumptions with the more realistic assumptions of uncertainty about the location of goods and search costs. In contrast to existing economic models, gifts in our model enhance expected welfare. Moreover, gift giving cannot be replaced by a profit-maximizing trader nor the introduction of nearby specialty stores carrying gift goods. We use our model to explain a number of stylized facts about gift giving, the organization of retail trade and in-kind government transfers.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 53 (2009)
Issue (Month): 4 (May)
Pages: 445-460

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Handle: RePEc:eee:eecrev:v:53:y:2009:i:4:p:445-460

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Gift giving Search Welfare Retailing Refunds;

References

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  1. H. Lorne Carmichael & W. Bentley MacLeod, 1997. "Gift Giving and the Evolution of Cooperation," Boston College Working Papers in Economics 338., Boston College Department of Economics.
  2. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  3. Besley, T. & Coate, S., 1989. "Public Provision Of Private Goods And The Redistribution Of Income," Papers 36, Princeton, Woodrow Wilson School - Discussion Paper.
  4. Ruffle, Bradley J., 1999. "Gift giving with emotions," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 399-420, July.
  5. Posner, Richard A, 1980. "A Theory of Primitive Society, with Special Reference to Law," Journal of Law and Economics, University of Chicago Press, vol. 23(1), pages 1-53, April.
  6. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-36, December.
  7. Joel Waldfogel, 2002. "Gifts, Cash, and Stigma," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 415-427, July.
  8. Pollak, Robert A, 1988. "Tied Transfers and Paternalistic Preferences," American Economic Review, American Economic Association, vol. 78(2), pages 240-44, May.
  9. Theodore C. Bergstrom, 2002. "Evolution of Social Behavior: Individual and Group Selection," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 67-88, Spring.
  10. Pieters, Rik & Robben, Henry, 1999. "Consumer Evaluation of Money as a Gift: A Two-Utility Model and an Empirical Test," Kyklos, Wiley Blackwell, vol. 52(2), pages 173-200.
  11. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
  12. Carol Horton Tremblay & Victor Tremblay, 1995. "Children and the economics of Christmas gift-giving," Applied Economics Letters, Taylor & Francis Journals, vol. 2(9), pages 295-297.
  13. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, vol. 45(10), pages 1793-1810, December.
  14. Theodore C. Bergstrom, . "On the Evolution of Altruistic Ethical Rules for Siblings," ELSE working papers 017, ESRC Centre on Economics Learning and Social Evolution.
  15. Mercier Ythier, Jean, 2006. "The Economic Theory of Gift-Giving: Perfect Substitutability of Transfers and Redistribution of Wealth," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  16. Solnick, Sara J & Hemenway, David, 1996. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 86(5), pages 1299-1305, December.
  17. Orit Tykocinski & Bradley J. Ruffle, 2000. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 319-324, March.
  18. Bruce, Neil & Waldman, Michael, 1991. "Transfers in Kind: Why They Can Be Efficient and Nonpaternalistic," American Economic Review, American Economic Association, vol. 81(5), pages 1345-51, December.
  19. Joel Waldfogel, 2005. "Does Consumer Irrationality Trump Consumer Sovereignty?," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 691-696, November.
  20. Fischer, Eileen & Arnold, Stephen J, 1990. " More than a Labor of Love: Gender Roles and Christmas Gift Shopping," Journal of Consumer Research, University of Chicago Press, vol. 17(3), pages 333-45, December.
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Cited by:
  1. Maroš Servátka & Steven Tucker & Radovan Vadovic, 2009. "Building Trust One Gift at a Time," Working Papers in Economics 09/11, University of Canterbury, Department of Economics and Finance.

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