Gift giving is thought to be welfare decreasing. This claim rests on two key assumptions, namely, full information as to the whereabouts of all goods and the ability to reach the stores that contain desired goods costlessly. In this paper, we replace these two assumptions with the more realistic assumption of uncertainty about the location of goods. As a result, search costs ensue. In sharp contrast to existing economic models of gift giving, gifts in our model are given only when they enhance expected welfare, that is, the amount they save the receiver looking for the gift himself is higher than the expected price of unwanted gifts. The more difficult it is for the recipient to obtain the good he desires or the lower the price of this good, the more likely he is to receive it as a gift. Search costs affect not only the decision to give but also the choice of gift. We characterize the relationship between gift giving and the giverUs information about the recipient's preferences as well as her information about the gifts available in the economy. We use our model to explain a number of stylized facts about gift giving in modern and primitive societies.
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Paper provided by University of Exeter, School of Business and Economics in its series Discussion Papers with number
00/20.
Length: 28 pages Date of creation: 2000 Date of revision: Handle: RePEc:fth:exetec:00/20
Contact details of provider: Postal: School of Business and Economics University of Exeter Streatham Court Rennes Drive Exeter EX4 4PU Phone: (01392) 263218 Fax: (01392) 263242 Web page: http://www.exeter.ac.uk/sobe/ More information through EDIRC
Find related papers by JEL classification: A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines D60 - Microeconomics - - Welfare Economics - - - General D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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