The Non-Monetary Nature of Gifts
Posted: 16 Feb 2014
Date Written: October 1, 2000
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, Z1
Suggested Citation: Suggested Citation