The Non-Monetary Nature of Gifts

Posted: 16 Feb 2014

See all articles by Lars Stole

Lars Stole

University of Chicago - Booth School of Business

Canice Prendergast

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: October 1, 2000

Abstract

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

Stole, Lars A. and Prendergast, Canice, The Non-Monetary Nature of Gifts (October 1, 2000). European Economic Review, Vol. 45, 2001. Available at SSRN: https://ssrn.com/abstract=2396182

Lars A. Stole (Contact Author)

University of Chicago - Booth School of Business ( email )

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Canice Prendergast

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States
773-702-7309 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

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