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Gift-giving and deadweight loss

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

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    File URL: http://www.sciencedirect.com/science/article/B6W5H-4V74XN5-3/2/de309433ccabc343415b42aa302a702c
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

    Volume (Year): 38 (2009)
    Issue (Month): 2 (March)
    Pages: 215-220

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    Handle: RePEc:eee:soceco:v:38:y:2009:i:2:p:215-220

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    Web page: http://www.elsevier.com/locate/inca/620175

    Related research

    Keywords: Deadweight loss Market failure Externalities Christmas Gift-giving;

    References

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    1. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
    2. Waldfogel, Joel, 1996. "The Deadweight Loss of Christmas: Reply," American Economic Review, American Economic Association, vol. 86(5), pages 1306-08, December.
    3. David Hemenway & Sara J. Solnick, 2000. "The Deadweight Loss of Christmas: Reply," American Economic Review, American Economic Association, vol. 90(1), pages 325-325, March.
    4. Joel Waldfogel, 2002. "Gifts, Cash, and Stigma," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 415-427, July.
    5. Joel Waldfogel, 2005. "Does Consumer Irrationality Trump Consumer Sovereignty?," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 691-696, November.
    6. Jennifer Pate Offenberg, 2007. "Markets: Gift Cards," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 227-238, Spring.
    7. List, John A & Shogren, Jason F, 1998. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 88(5), pages 1350-55, December.
    8. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, vol. 45(10), pages 1793-1810, December.
    9. 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.
    10. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-36, December.
    11. Jeroen van de Ven, 2002. "The Demand for Social Approval and Status as a Motivation to Give," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(3), pages 464-, September.
    12. 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.
    13. 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.
    14. Solnick, Sara J & Hemenway, David, 1998. "The Deadweight Loss of Christmas: Reply," American Economic Review, American Economic Association, vol. 88(5), pages 1356-57, December.
    15. Grewal, Dhruv & Iyer, Gopalkrishnan R. & Krishnan, R. & Sharma, Arun, 2003. "The Internet and the price-value-loyalty chain," Journal of Business Research, Elsevier, vol. 56(5), pages 391-398, May.
    16. Ruffle, Bradley J., 1999. "Gift giving with emotions," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 399-420, July.
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