Working Paper: CEPR ID: DP9230
Authors: Ulrike M. Malmendier; Klaus M. Schmidt
Abstract: In many cultures and industries gifts are given in order to influence the recipient, often at the expense of a third party. Examples include business gifts of firms and lobbyists. In a series of experiments, we show that, even without incentive or in-formational effects, small gifts strongly influence the recipient?s behavior in favor of the gift giver, in particular when a third party bears the cost. Subjects are well aware that the gift is given to influence their behavior but reciprocate nevertheless. Withholding the gift triggers a strong negative response. These findings are incon-sistent with the most prominent models of social preferences. We propose an ex-tension of existing theories to capture the observed behavior by endogenizing the ?reference group? to whom social preferences are applied. We also show that dis-closure and size limits are not effective in reducing the effect of gifts, consistent with our model. Financial incentives ameliorate the effect of the gift but backfire when available but not provided.
Keywords: corruption; externalities; gift exchange; lobbyism; reciprocity; social preferences
JEL Codes: C91; D62; D73; I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| gift receipt (Y60) | decision-maker favors gift-giver's product (D91) |
| no gift (Y70) | decision-maker does not favor gift-giver's product (L14) |
| gift-giving (D64) | obligation to reciprocate (D64) |
| gift influence awareness (D64) | decision-making aligns with client preferences (D91) |