Gifts as Economic Signals and Social Symbols

In the paper

“Furthermore, gift giving will often be reciprocal (though not always), because gifts are meant to spur investments that are reciprocal.”

In the paper

“The unwilling player 1 can be deterred from participating at all (though willing players are not deterred; see App.), thus saving player 2 the cost of a wasted gift, if e1 < T11G2P2 and, for player 2, e2 < T21G1Pl.”

In the paper

“A suitor will give larger gifts if he (a) is more confident that the courted player is in love with him or (b) has more to gain by giving a gift and then cheating.”

In the paper

“(iii) if one player's chance of investing is low and another's is sufficiently high, then only the low-probability player should give a gift to the highprobability player, and investment will then take place;”

In the paper

“In this simple investment game, unwilling players never invest (by definition), and both willing players invest if and only if their expected values from investing are above their expected values from not investing”

In the paper

“If the prior probabilities P1, P2 are small, then inefficient gift giving does more good (deterrence) than harm (opportunity cost), but, if the probabilities are large, as when a relationship is mature, giving inefficient gifts does more harm than good, and players prefer to exchange efficient gifts.”

In the paper

“Players will not invest early in a relationship, when either P1 or P2 is low (and below the investment threshold), or before an important commitment, when Q(W) is especially large (so that the probability threshold is large).”

In the paper

“Now, assuming C(W) < C(U),19 the threshold in (A7) is higher than the threshold t2, so there is a range of P2 in which a W-type player 1 is willing to invest but unwilling to pay the signaling cost to convince player 2 to invest.”

In the paper

“If we define the right-hand side as an”

In the paper

“Thus, players exchange perfectly efficient gifts, but the sizes of the gifts players give distinguish their willingness.”

In the paper

“First, we can rule out”

In the paper

“There are a variety of purestrategy equilibria, depending on the exact values of the probabilities and utilities.”

In the paper

“if the efficiency thresholds in (8) and ( 9) are enforced and a U-type player 2 does not enter the game, then a W-type player 1 earns expected net gift receipts of P2(-G1 + elG2) -T1 and expected relationship gains of P2R(W).(These net gains are always positive, so Wtypes are not discouraged from entering the game as U-types are, assuming e's are chosen to make [8] and [9] bind.”

In the paper

“All the equilibria described above are sequential.”

In the paper

“Otherwise, the two games are exactly the same, except the two-sided gift-giving solution is incentive efficient for any probabilities in the cooperative game, while it is only an equilibrium for certain probabilities in the noncooperative game.”

In the paper

“Two-sided Signaling Equilibria (table A2) First, suppose that both prior probabilities P1 and P2 are below their thresholds, t, and t2, so that if players do nothing to change their partners' beliefs, then no investment will result in the second period.A separating equilibrium results if both players choose (W, G; U, 0)-only willing players invest in the signal, so players can be separated by”

In the paper

“However, a W-type player 1 has a net expected value of -T- G1 + elG2P2 + P2R(W).This expression is positive if el just satisfies the threshold (8) because then the first and third terms cancel out, and, since G1 = P2C(U), it is less than P2R(W) (because R[W] > C[U] by assumption).”

In the paper

“Combining this inequality for W-type player 2 with an analogous condition for player 1 yields condition (10) in the text.”

In the paper

“The feasibility constraints form a system of eight inequalities-four individual rationality (IR) constraints, one for each possible player type, and four incentive-compatibility (IC) constraints.”

In the paper

“If both priors P1 and P2 are above their thresholds, t1 and t2, then players will invest in the second period even if they have learned nothing about their partner's type from the signaling.As a result, both types of players have no incentive to signal, and the result is a no-signaling equilibrium in which players do invest in the second period.”

In the paper

“This solution is incentive efficient as well as feasible.(That is, there is no solution that makes all players better off.Indeed, every other feasible solution makes some players worse off.)”

In the paper

“For player 1, for instance, this implies P2R(W) > G2(eu -ew) > P2C(U),(A12)”

• Also stated in: § The Efficiency of Equilibrium Gifts · plain

  “and, since both expressions on the right and the left of the inequality are positive, this implies eu must be greater than ew.”

In the paper

“The signaling equilibria, if they exist, restrict how costly gift signals G1 and G2 must be (to satisfy inequalities [A4] and [A5]), but no natural limits on gift efficiency emerge.”

In the paper

“In this region (see fig. 1), no signaling (and, subsequently, no investment) takes place, and there is a symmetric region in which player 2 would like to signal but cannot afford to.”

In the paper

“One can show formally that inefficiency is necessary because the value of gifts received subsidizes the cost of gifts given, and inefficient gifts deter partners who are unwilling to invest from simply collecting gifts.”

In the paper

“18 There are no mixed-strategy equilibria.W-types will always prefer I to any mixedstrategy play of I and N, conditional on their partner's probability being above its threshold.Intuitively, it seems that U-types might sometimes play I, if their probabilities are below their threshold, to coax their partner into playing L. However, U-types' sometimes playing I is not a Nash equilibrium, since, if”

In the paper

“The unique Bayesian Nash equilibria are these:18 (1) If both probabilities are above their thresholds t, and t2, players choose (W, I; U, N). ( 2) If either probability is below its threshold, then one W-type player will not invest, so the other W-type player will not invest either, and the players both choose (W, N; U, N).If equilibrium (2) results, then signaling is needed.”

In the paper

“helpful in explaining gift giving between groups of people or charitable gift giving by individuals or organizations”

In the paper

“On meeting, a nervous couple (with low probabilities of willingness) initially prefer to exchange inexpensive, inefficient gifts that have only sentimental value.”

• Also stated in: § Equilibria in the Two-Stage Gift-giving Game · plain

  “they gradually give more expensive, more practical gifts.”

• Also stated in: § Equilibria in the Two-Stage Gift-giving Game · hedged

  “Eventually, perhaps, they simply buy themselves what they want with their partners' money.”

In the paper

“The game, while simple, begins to account for some of the basic stylized facts, since conclusion (iii) shows that reciprocity is not essential and conclusion (iv) provides a rationalization for inefficient gift giving.”

In the paper

“Since such resources are nonsalvageable, they make gift giving inefficient (unless they substitute for the receiver's normal shopping).”

In the paper

“suggests that courtship of top executives, often with material gift giving, is an important precursor to a successful corporate”

What the sources say

• ?Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  cites Wall Street Journal 1982

In the paper

“The conventional exchange of token gifts (flowers, special efforts in grooming or fashion) on initial dates may be an institutionalization of the two-sided signaling equilibrium when willingness is unlikely.”

In the paper

“Accepting an overpriced dinner instead of its cash equivalent has an opportunity cost to the receiver; so, incurring that cost is simultaneously a signal of the giver's intentions and of the receiver's intentions.”

In the paper

“A DeBeers diamond ad reads,”

What the sources say

• ?Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  cites DeBeers

In the paper

“The cigars a proud father might distribute to signal the birth of a child are probably not smoked, nowadays, but they are unmistakable signals.”

In the paper

“In the game-theoretic models, players are assumed to signal simultaneously, but they actually prefer to signal last (to avoid wasting gifts on a partner found to be unwilling).”

In the paper

“All these explanations begin with the simple notion that gifts are signals of some characteristic of the gift giver.”

In the paper

“Good gift giving thus involves guessing a gift receiver's tastes, which often produces inefficiency.”

In the paper

“Perhaps keeping the price unknown cushions either the giver or receiver against disappointment if the gift cost much more or much less than we would prescribe (cf.Sabini and Silver [1982, pp. 107-23] on the protective ambiguity of flirting).”

What the sources say

• ?Not checked — no full text of the sourcecites Sabini and Silver [1982

In the paper

“Biological predictors and verbal pleas are notoriously unreliable (because they are not hard to fake), so partners need an indicator that is too costly to fake-a signal.”

In the paper

“The degree of inefficiency here need not be large, but there will often be some inefficiency.”

In the paper

“Often, long-term business or political relationships16 are economically identical to personal relationships, so we are not surprised by the”

What the sources say

• ?Not checked — no full text of the sourcecites Moore 1973 source

In the paper

“For example, Caplow (1984) notes strict compliance with the rule that”

What the sources say

• ?Not checked — no full text of the sourcecites Caplow 1984 source

In the paper

“Conventions, like language, are”

What the sources say

• ?Not checked — no full text of the sourcecites Caplow 1984 source

In the paper

“Any net cost of time, energy, or imagination is part of the signaling cost of a gift: the thought does count.”

In the paper

“However, conventions arise to coordinate behavior among people who cannot communicate with one another easily (Lewis 1969), so when things change and a more efficient signaling convention becomes available, it is difficult, by the nature of conventions, to coordinate change from the old convention to a new one.”

What the sources say

• ?Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  cites Lewis 1969

In the paper

“Holidays occur regularly, but the appropriate rate of signaling occasions should be as fast or slow as the rate of change in a partner's willingness.”

In the paper

“Caplow (1982) notes that, at Christmas, employers routinely give money gifts to employees.”

What the sources say

• ?Not checked — no full text of the sourcecites Caplow (1982) source

In the paper

“Since the courted player is assumed to know whom he is in love with better than the suitors do, the only information that gifts convey is about the gains suitors would get from cheating.”

In the paper

“These”

In the paper

“gifts will work very well because the gift givers are known to the recipients (unless they are given by secret admirers), as we require in our analysis of the game, and gifts clearly mark the informational purpose and target of the signal.”

In the paper

“Inefficient gift giving is a double-edged sword, however: it protects the giver from gift collectors, but it also costs the willing giver the opportunity to receive gifts he really enjoys.”

In the paper

“Each gift in this class signals willingness equally well ($50's worth), but each gift signals something else-tastes the giver has or hopes the receiver develops (Spin); how carefully the giver was listening when the receiver discussed food or wine (sushi, wine); or how much the giver appreciates the receiver's bodily (underwear) or intellectual (poetry) charms or thinks those bodily charms need”

In the paper

“Other rules of etiquette dictate when it is appropriate form for only one person to give a gift (as in my one-sided gift-giving equilibria).”

In the paper

“Although I argued above that these gifts are simply conventional, there may be some reasons (besides historical accident) why these gifts, rather than others, became conventional.”

In the paper

“Therefore, we might expect to see a decline in the traditional premarriage exchange of gifts from men to women, though important gifts (like diamonds) will still be useful to signal intentions on nonmarriage occasions.”

In the paper

“To explain involuntary labor-market unemployment, Akerlof (1982Akerlof ( , 1984) ) suggests that hard work and above-market wages (which result in a shortage of jobs) are like an exchange of gifts between employers and employees who”

What the sources say

• ?Not checked — no full text of the sourcecites Akerlof (1982 source
• ?Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  cites [1984]

In the paper

“This is precisely inefficient gift giving, except that in business settings the cost of gifts needed to ensure each side's investment can be so huge that exchanging gifts permanently is extremely inefficient.”

In the paper

“Of course, holidays serve other purposes too, and holidays do not always conveniently occur when simultaneous gift giving is needed-hence, the function of engagement rings, lavish wedding expenses, graduation gifts, and so on.”

In the paper

“If gift giving is cooperative, simultaneity is assumed, but, if gift giving is noncooperative, it is useful to have some occasions on which it is commonly known that gifts should be exchanged to avoid the problem of who gives the gift first.”

In the paper

“Many gifts signal things by convention (Lewis 1969) or custom (Akerlof 1980), and these conventional gifts are often inefficient.”

What the sources say

• ?Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  cites Lewis 1969
• ?Not checked — no full text of the sourcecites Akerlof 1980 source

In the paper

“When vacationers bring back trinkets or send postcards to loved ones, they remind receivers at home that the giver is thinking about them, thus signaling by their thoughts (and possibly taking advantage of international price differences as well).”

In the paper

“A similar idea dominates recent theories of product-quality assurance, in which firms buy inefficient gifts of advertising (Klein and Leffler 1981) or give gifts of high-quality goods sold at low-quality prices (Shapiro 1983) to signal their intention to produce high-quality goods.”

What the sources say

• ?Not checked — no full text of the sourcecites Klein and Leffler 1981 source
• ?Not checked — no full text of the sourcecites Shapiro 1983 source

In the paper

“Since it is very costly for women to bear children alone, and men are always tempted to desert the marriage after conception (arguing by anal-ogy, remember), the premarriage gifts men give, such as an engagement ring, are like the nests that male birds build to pledge their fidelity to female birds.”

In the paper

“Furthermore, the assumption of cooperation is probably best suited to mature relationships where P1 and P2 are presumably above their thresholds (else, the relationship would not have lasted) and where signaling does not take place noncooperatively.”

In the paper

“In general, familial gift giving is more like primitive premarket exchange-as in the anthropological accounts, where gifts provide social insurance-than like signaling during courtship, so the inefficiencies that are important for signaling purposes need not be present in gift giving in the family.”

In the paper

“A third explanation for inefficiency is that the meaning of gifts is often conventional and arbitrary.Since convention is hard to change, once established, inefficient gift giving could persist.”

In the paper

“Perhaps, by avoiding such comparison, whether by removing price tags or by making taboo the photographic comparison among gifts, givers and receivers can believe their relationships (as signaled by the gift) are better than they are.”

In the paper

“Inefficient gifts help deter, but they can hurt willing players.”

In the paper

“In this regard, note Caplow's (1984) observation that parents rarely photograph their children with all their gifts unwrapped (though they often photograph children surrounded by wrapped gifts), because to do so”

What the sources say

• ?Not checked — no full text of the sourcecites Caplow's (1984) source

In the paper

“By adding investment, we give a noninvesting player something to gain from riding free, so we provide a motive for some players to lie about their investment plans, and we create an information problem that signaling can solve.”

In the paper

“The signaling view accounts for some stylized facts about modern practices of gift giving-the thought counts, holidays coordinate gift giving that is not naturally simultaneous, and so on.”

In the paper

“The intuition behind this result is that, by lowering any player's gift efficiency, we certainly make that player worse off, and we either make the other-type player no better off, or we make that player worse off because the IC constraints force player's utilities to be not far apart.”

In the paper

“Children's gifts to parents-often charmingly homemade and ugly, with no direct utility value to parents-signal the child's affection but not exactly as in courtship.”

In the paper

“Usually, the amounts are not publicized, perhaps for the same reasons that price tags are removed from gifts.”

In the paper

“(Caplow [1982, p. 386] noted that at Christmas”

What the sources say

• ?Not checked — no full text of the sourcecites Caplow [1982 source

In the paper

“When efficient gifts are appropriate.-Whenparents give cash as a wedding present to their children, that strikingly cold gift draws attention to the end of the parent-child relationship (for, if the relationship were intended to endure, an inefficient gift would be more appropriate).”

In the paper

“Put differently, the overt pricing of a relationship”

What the sources say

• ?Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  cites Hemenway 1984

In the paper

“A fourth explanation is that gifts are signals of how much a gift giver knows about the receiver's tastes.If so, gifts are necessarily guesses about tastes that are sometimes wrong; therefore, gifts are sometimes inefficient.”

In the paper

“Instead, gifts from parents may shape or educate a child's tastes, or they may be control mechanisms to reward or punish children.”

In the paper

“While the analysis seems especially appropriate for simple gift giving during courtship and in some business settings, it is not well suited to gift giving in families or to explaining pure charity.”

In the paper

“The variety of sociological explanations for gift giving suggests a second explanation, that gifts might serve multiple signaling purposes simultaneouslysignaling”

In the paper

“Adding within-or between-player utility interdependencies-such as gifts' having less utility cost when you are in love with the gift receiver-makes it easy to explain inefficient gift giving.”

In the paper

“Gift giving is puzzling from an economic perspective because it is inefficient-givers spend money on gifts differently from the way receivers would-and it seems to be necessarily so.”

In the paper

“(Intuitively, the player who is most likely to be a U-type must signal to his partner.The sincere must convince the skeptic, not the other way around.)”

In the paper

“While the role of investment may seem contrived and artificial, without an investment-theoretic definition of the relationship, players have no incentive to lie, so no signals are needed.”

In the paper

“Sincefamilies are voluntary organizations formed by parents and having children who necessarily belong, there is no process of courtship to imply that gifts are signals.”

In the paper

“Perhaps this gesture blesses the marriage, signaling trust in the child's new spouse and acknowledging the validity of the child's new family.”

In the paper

“Cooperation-defined in game theory as the ability to communicate about and enforce the strategy choices of players-seems realistic in many gift-giving situations: partners do talk about gift giving in relation-ships, including discussions of gift costs and whether gifts should be efficient or not.”

In the paper

“Gifts Gifts in memory of the dead are often deliberately efficient as well (such as contributions to a specified charity), perhaps because the forwardlooking relationship, signaled by inefficient gifts, is ended.”