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How Consumers use Gift Certificates

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Author Info

  • Flora Felso

    ()
    (Delft University of Technology)

  • Adriaan R. Soetevent

    ()
    (University of Amsterdam)

Abstract

We survey 1,050 consumers who have just redeemed one or more open loop gift certi cates to learn whether they view gift certi cate income, cash gifts and non-gift income as substitutes. We fi nd that the majority (83%) of recipients spends the certi cates 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 certi ficate to buy an item they really love to have. While inconsistent with standard microeconomic demand theory, this behavior can be explained by narrow racketing: In spending gift certifi cates, 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 ceriti cate. Previous studies have found that both giving in-kind gifts (Waldfogel, 1993) as giving gift cards (O enberg, 2007) entail a welfare loss of 10-30 percent when compared to giving cash. We find that the welfare eff ects of open loop gift certi cates among users are limited: The consumption of broad bracketing consumers is una ffected and narrow bracketing consumers seem to value the possibility to separate gift certi ficate income from other income sources.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 12-002/1.

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Date of creation: 02 Jan 2012
Date of revision: 27 Nov 2013
Handle: RePEc:dgr:uvatin:20120002

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Related research

Keywords: gift giving; labeling;

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References

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  1. Jennifer Pate Offenberg, 2007. "Markets: Gift Cards," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 227-238, Spring.
  2. Michael Grossman & Naci H. Mocan, 2011. "Economic Aspects of Obesity," NBER Books, National Bureau of Economic Research, Inc, number gros09-1, October.
  3. 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.
  4. Neeraj Kaushal & Qin Gao, 2009. "Food Stamp Program and Consumption Choices," NBER Working Papers 14988, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The deadweight loss of gift certificates
    by Economic Logician in Economic Logic on 2012-02-03 15:12:00
  2. Gift vouchers, & mispredicting markets
    by ? in Stumbling and Mumbling on 2013-12-11 13:51:00

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  1. Economic Logic blog

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