The Non-Monetary Nature of Gifts
University of Chicago - Booth School of Business
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
October 1, 2000
European Economic Review, Vol. 45, 2001
This paper addresses the prevalence of non-monetary gifts over more highly valued and efficient monetary transfers in social relationships. We demonstrate that under a wide variety of circumstances, inefficient non-monetary gifts will be offered by a donor in lieu of cash in order to signal the donor's quality of information about the recipient's preferences. This result emerges because gift giving is inefficient relative to cash, and not because of any arbitrary assumptions regarding communication. In particular, the donor has available the strategy of offering cash and saying what he would have purchased. Nonetheless, there is still an important equilibrium role for buying gifts.
Keywords: Gifts, Non-monetary exchange, Signaling
JEL Classification: A13, D10, D64, D82, Z1Accepted Paper Series
Date posted: February 16, 2014
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