Abstract:
From an economic perspective, the practice of gift-giving in social rela-
tionships makes little sense due to the ineffciencies that arise from commonly
mismatched gifts and preferences. This paper addresses the frequency of non-
monetary gifts compared to more efficient cash transfers. While there is a vast
literature concentrated on this cultural phenomenon, we examine a model based
on the idea that the sentimental value of a gift can be measured in terms of
the time and energy the donor spent to select a desirable gift for the recipient.
We demonstrate that under a variety of circumstances, individuals choose to
give non-monetary gifts over cash in order to signal to the recipient that they
exerted this effort.
