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Gift-giving and deadweight loss

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  • Principe, Kristine E.
  • Eisenhauer, Joseph G.

Abstract

Although economic theory asserts that cash is often superior to gifts in-kind for maximizing welfare, there has been no empirical consensus on whether in-kind gift-giving destroys or creates value--i.e., whether recipients value gifts less than, as much as, or more than givers pay for them. The present study introduces a simple but important methodological innovation. Whereas prior studies focused exclusively on recipients' estimates of the costs of gifts, we obtain more objective information on actual market prices. We also compare gifts in-kind to gift cards. We find a deadweight loss that averages more than 7 percent of the market price on gifts in-kind, and more than 14 percent on gift cards.

Suggested Citation

  • Principe, Kristine E. & Eisenhauer, Joseph G., 2009. "Gift-giving and deadweight loss," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 215-220, March.
    • Handle: RePEc:eee:soceco:v:38:y:2009:i:2:p:215-220
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    References listed on IDEAS

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    Cited by:

    1. Khouja, Moutaz & Pan, Jingming & Zhou, Jing, 2016. "Effects of gift cards on optimal order and discount of seasonal products," European Journal of Operational Research, Elsevier, vol. 248(1), pages 159-173.
    2. Klaus Abbink & Gaurav Datt & Lata Gangadharan & Digvijay Negi & Bharat Ramaswami, 2022. "Deadweight Losses or Gains from In-kind Transfers? Experimental Evidence from India," Monash Economics Working Papers 2022-10, Monash University, Department of Economics.
    3. Laura Birg & Anna Goeddeke, 2016. "Christmas Economics—A Sleigh Ride," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1980-1984, October.
    4. Birg, Laura & Pommeranz, Simon, 2018. "The deadweight loss of christmas - Reply," University of Göttingen Working Papers in Economics 361, University of Goettingen, Department of Economics.
    5. Parag Waknis & Ajit Gaikwad, 2017. "The Deadweight Loss of Diwali: A Developing Country Perspective on Economics of Gift Giving," Economics Bulletin, AccessEcon, vol. 37(1), pages 530-538.
    6. Zeev Shtudiner, 2020. "Holiday gift-giving - deadweight loss or welfare gain?," Economics Bulletin, AccessEcon, vol. 40(3), pages 1977-1984.
    7. Vic Benuyenah, 2021. "Face-saving and Seasonal Gifts: Analysis of Cultural Exchanges in the Confucian Market Place," International Review of Management and Marketing, Econjournals, vol. 11(2), pages 59-66.
    8. Huang, Wei & Rhee, S. Ghon & Suzuki, Katsushi & Yasutake, Taeko, 2022. "Do investors value shareholder perks? Evidence from Japan," Journal of Banking & Finance, Elsevier, vol. 143(C).

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