Gift Exchange versus Monetary Exchange: Theory and Evidence
AbstractWe study the Lagos and Wright (2005) model of monetary exchange in the laboratory. With a finite population of sufficiently patient agents, this model has a unique monetary equilibrium and a continuum of non-monetary gift exchange equilibria, some of which Pareto dominate the monetary equilibrium. We find that subjects avoid the gift-exchange equilibria in favor of the monetary equilibrium. We also study versions of the model without money where all equilibria involve non-monetary gift-exchange. We find that welfare is higher in the model with money than without money, suggesting that money plays a role as an efficiency enhancing coordination device.
CitationDuffy, John, and Daniela Puzzello. 2014. "Gift Exchange versus Monetary Exchange: Theory and Evidence." American Economic Review, 104 (6): 1735-76. DOI: 10.1257/aer.104.6.1735
- C92 Design of Experiments: Laboratory, Group Behavior
- D12 Consumer Economics: Empirical Analysis
- E40 Money and Interest Rates: General
- Z13 Economic Sociology; Economic Anthropology; Social and Economic Stratification