| dc.description.abstract | Gift giving is thought to decrease welfare. Recipients are sometimes stuck with gifts
they would not have purchased because the giver does not perfectly know the recipient’s
preferences and in-kind gifts cannot be costlessly refunded. Such gifts are welfare reducing
compared to giving cash if, in addition, recipients possess full information as to which stores
carry their desired goods and the ability to reach these stores costlessly. We replace these two
latter assumptions with the more realistic assumptions of uncertainty about the location of
goods and search costs. In contrast to existing economic models, gifts in our model enhance
expected welfare. Moreover, gift giving cannot be replaced by a profit-maximizing trader
nor the introduction of nearby specialty stores carrying gift goods. We use our model to
explain a number of stylized facts about gift giving, the organization of retail trade and
in-kind government transfers. | en_GB |
