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You Owe Me

Author

Listed:
  • Malmendier, Ulrike

    (University of California at Berkeley)

  • Schmidt, Klaus M.

    (University of Munich)

Abstract

In business and politics, gifts are often aimed at influencing the recipient at the expense of third parties. In an experimental study, which removes informational and incentive confounds, subjects strongly respond to small gifts even though they understand the gift giver's intention. Our findings question existing models of social preferences. They point to anthropological and sociological theories about gifts creating an obligation to reciprocate. We capture these effects in a simple extension of existing models. We show that common policy responses (disclosure, size limits) may be ineffective, consistent with our model. Financial incentives are effective but can backfire.

Suggested Citation

  • Malmendier, Ulrike & Schmidt, Klaus M., 2017. "You Owe Me," Rationality and Competition Discussion Paper Series 1, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:1
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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