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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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    1. 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.
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    3. Joel Waldfogel, 2002. "Gifts, Cash, and Stigma," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 415-427, July.
    4. Orit Tykocinski & Bradley J. Ruffle, 2000. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, pages 319-324.
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    7. Jennifer Pate Offenberg, 2007. "Markets: Gift Cards," Journal of Economic Perspectives, American Economic Association, pages 227-238.
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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. 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.
    3. Laura Birg & Anna Goeddeke, 2016. "Christmas Economics—A Sleigh Ride," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1980-1984, October.

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