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Confounding Issues in the Deadweight Loss of Gift-Giving

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  • H. Kristl Davison
  • Mark N. Bing
  • E. Bruce Hutchinson
  • Leila J. Pratt
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    Abstract

    When a gift is given, someone other than the final consumer makes the consumption choice. Thus there is a possibility that the gift will not match the preferences of the receiver, i.e., the gift will represent a wise use of the money given the gift-giver's tastes but not necessarily a wise use of money given the recipient's tastes. In other words, gift giving can result in a deadweight loss. This paper addresses and clarifies the discrepancy between Waldfogel's (1993) finding of a deadweight loss from gift giving and Solnick and Hemenway's (1996) finding of a deadweight gain from gift giving. It also builds on some of the concerns raised by Ruffle and Tykocinski (2000).

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    File URL: http://mtsu.edu/~jee/pdf/MS207pp1-14.pdf
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    Article provided by Middle Tennessee State University, Business and Economic Research Center in its journal Journal for Economic Educators.

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    Handle: RePEc:mts:jrnlee:200801

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    1. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-36, December.
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