|
Article Excerpt
I. INTRODUCTION
At Christmas, large families and groups of friends often organize secret Santa gift exchanges in which each participant gives and receives one gift rather than giving and receiving gifts from everyone. Participants typically draw names from a hat to assign each persona secret Santa. Organizers claim that a secret Santa gift exchange will benefit participants in two ways. The first is obvious: buying and wrapping one large gift is easier than buying and wrapping several smaller gifts. This benefit suggests that a secret Santa gift exchange lowers the cost of gift giving, and so we would expect to see a corresponding increase in holiday spending. However, organizers also claim that a secret Santa gift exchange will save participants' money, while allowing them to give and receive more meaningful gifts. This benefit suggests that a secret Santa gift exchange will reduce holiday spending, as a participant who would otherwise give ten gifts worth $12 each will be inclined to give one gift worth something less than $120. (1) While this behavior seems reasonable, it raises some revealing questions about the nature of generosity--questions that conventional models of generosity cannot answer. For example, why would a secret Santa gift exchange reduce holiday spending, and if it does, why would a reduction in holiday spending benefit participants?
A secret Santa gift exchange is essentially a cooperative gift-giving agreement. In conventional models of generosity, cooperation benefits participants because giving carries a positive externality. This externality occurs because giving brings enjoyment to the giver, the receiver, and (possibly) third parties. For example, when a grandmother gives her grandchild a new bicycle, both benefit. In addition, the child's parents may benefit from their child receiving a bike that they did not have to pay for. In models with positive externalities, cooperation makes everyone better off by increasing the total amount of giving. Conversely, cooperation in a secret Santa gift exchange makes everyone better off by decreasing the total amount of giving. By doing so, a secret Santa gift exchange may reveal a hidden aspect of giving: negative externalities.
The idea that giving could be associated with a negative externality may seem somewhat unphilanthropic. However, this article shows that several reasonable philanthropic assumptions, such as impact philanthropy and social comparison, unavoidably lead to negative gift externalities. For example, the grandmother's gift of a new bicycle might diminish the impact of the parent's gift. One cousin might give a larger gift to avoid being labeled as the cousin who gives the smallest gift. A husband might buy an expensive gift for his wife fearing that his wife will buy him an expensive gift. All these motives imply a negative gift externality.
For the purposes of this article, the important feature of a secret Santa gift exchange is that it concentrates each person's gift rather than spreading it around. This gift concentration is unique, in that it is done without eliminating recipients. For example, agreeing to give Christmas presents only to the youngest children in a family would concentrate gifts but not in the same way as a secret Santa gift exchange. Rather, a secret Santa gift exchange concentrates gifts not by eliminating recipients but by restricting the way gifts are allocated among recipients. In fact, the idea of restricting the way gifts are allocated among a group of recipients is not limited to the secret Santa gift exchange. It is also seen in common fund-raising strategies, such as a children's organization that allows a donor to sponsor an individual child rather than contribute to a general fund. Setting aside the possible motives for this fundraising strategy, sponsoring children raises an interesting philanthropic question. If, at the end of the day, 1,000 needy children are fed, does a donor feel more satisfied if he or she fed one child or if he or she provided each of these thousand children with a single grain of rice? Models traditionally used by economists to explain charitable giving do not adequately address this question. For example, altruism suggests that donors contribute because they value the welfare of children. Warm glow suggests that donors contribute because they value the act of giving. Holding constant the welfare of the children and the size of each donor's gift, neither motive explains why a donor would care how his or her contribution is specifically allocated among recipients. However, both the secret Santa gift exchange and the common fund-raising strategies suggest that some donors view having a large impact on a few recipients differently than having a small impact on many.
To address these questions, this article presents the results of a modified dictator game with a unique payoff structure designed specifically to determine what effect, if any, targeting gifts at fewer recipients has on average giving. The players' behavior strongly suggests that targeting gifts at fewer recipients reduces average giving. Although the experimental results do not rule out altruism and warm glow as important charitable motives, they do suggest that something in addition to these traditional models must also be motivating players to give. Furthermore, this additional motive is consistent with models that imply a negative gift externality.
II. CONCENTRATING GIFTS VERSUS TARGETING GIFTS
Gifts are said to be concentrated whenever a donor gives to fewer recipients. The simplest way to concentrate gifts is to restrict the group of recipients. However, neither a secret Santa gift exchange nor sponsoring children necessarily excludes recipients. Instead, these examples concentrate gifts by targeting them at specific recipients. That is, gifts are said to be targeted when (a) each donor gives to fewer recipients and (b) each recipient receives from fewer donors. For example, the question above asked how a donor would feel about feeding one child versus partially feeding many, holding constant the total amount of food going to each child. This question implicitly asks about the net effect of (a) and (b). An example of concentrating gifts, effect (a) without (b), would be to give half as many children twice as much food. in this case, neither the total amount of food nor the average amount of food going to each child has changed; the food is simply concentrated among fewer recipients. (2) Concentrating gifts in this fashion would have no effect on a warm glow philanthropist, who cares only about the total size of his or her gift. (3) However, an altruist, who cares about the total utility of a group of homogeneous recipients, would prefer to equalize the marginal utility of food across recipients. Therefore, for an altruist, concentrating gifts would not be a desirable outcome. (4)
This article refers to (a) as concentrating gifts and to the combined effect of (a) and (b) as targeting gifts. Whereas a single donor can independently concentrate his or her gift, targeting gifts requires coordination among donors or requires a third party to impose this coordination. Moreover, a targeted arrangement can be constructed such that if each donor gives the same amount when gifts are targeted compared to when gifts are spread around, then each recipient will receive the same amount when gifts are targeted compared to when gifts are spread around. Therefore, by combining effects (a) and (b), a targeted allocation nets out other confounding effects, such as group size and the need of recipients. This allows us to determine whether donors view having a large impact on a few recipients differently than having a small impact on many, without having to change the welfare of any recipient.
III. EXPERIMENTAL DESIGN
Subjects who participated in the experiment were recruited from undergraduate courses at the University of Colorado Denver in the spring semester of 2001. Subjects were told that they would play a game, lasting approximately 1 hour, in which they would earn money, paid to them in cash at the end of the game. How much money they would earn, the participants were told, would depend on the decisions they and the other players make during the game. Players were not paid a show-up fee. A total of 96 subjects participated in eight sessions, each containing 12 players and 8 rounds, totaling 768 decision observations. The participants earned $10.46 on average.
At the start of each session, the players were given a set of instructions and the rules of the game they were going to play. (5) The instructions and rules of the game were read aloud, and the players were allowed to ask questions. Players were told that they would play the game for eight rounds. In each round, players were given 100 tokens that they could "hold" or "pass." Players were allowed to hold all their tokens, hold some and pass some, or pass all their tokens. At the end of each round, tokens were converted into points in the following way: each token a player held earned him or her one point; each token a player passed became two points, distributed to other players in the group. At the end of the experiment, players were paid one penny for each point they earned. In all treatment groups, the self-interest Nash equilibrium was for every player to hold all their tokens, while the cooperative equilibrium was for every player to pass all their tokens.
Deviations from the Standard Dictator Game
In this experiment, a player's passed tokens were doubled into points, which were then equally divided among one, three, or five recipients, depending on the treatment group. (6) A player never received any of the points generated from his or her...
|
