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Broad and narrow bracketing in gift certificate spending

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  • Felső, Flóra Á
  • Soetevent, Adriaan R.

Abstract

We survey 1050 consumers who have just redeemed one or more open loop gift certificates to learn whether they view gift certificate income, cash gifts and non-gift income as substitutes. We find that the majority (83%) of recipients spend the certificates in the same way as cash. The other respondents (17%) bought an item they would not have bought otherwise but adjustments in their shopping pattern do not seem to result from constraints in redeeming the certificates: 80% of all respondents in this group says they have used the certificate to buy an item they really love to have. While inconsistent with standard microeconomic demand theory, this behavior can be explained by narrow bracketing: in spending gift certificates, these consumers consider a limited choice set of nice, personal items. Our data show that females are more likely to narrow bracket gift certificate income and that positive reciprocity towards the giver induces narrow bracketing in case the giver is a household member who suggests to buy a particular item using the certificate.

Suggested Citation

  • Felső, Flóra Á & Soetevent, Adriaan R., 2014. "Broad and narrow bracketing in gift certificate spending," European Economic Review, Elsevier, vol. 66(C), pages 284-302.
    • Handle: RePEc:eee:eecrev:v:66:y:2014:i:c:p:284-302
    DOI: 10.1016/j.euroecorev.2013.11.011
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    Cited by:

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    4. Michał Krawczyk, 2014. "Probability weighting in different domains: the role of stakes, fungibility, and affect," Working Papers 2014-15, Faculty of Economic Sciences, University of Warsaw.

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    More about this item

    Keywords

    Gift giving; Narrow bracketing; Labeling; In-kind gifts;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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