Does Gift Competition Hurt? An Experimental Study of Multilateral Gift Exchange

Bilateral gift exchange often benefits the gift-giver, but what is the effect of multilateral gift exchange? This study employs a two-giver-one-recipient real task gift exchange game to investigate the effect of gift competition. We show that gift competition hurts givers and benefits recipients. Givers suffer because their gifts increase, but are not repaid generally. Further analysis suggests that this phenomenon is not attributable to givers' erroneous beliefs about recipients' responses, but rather to the negative externality inherent in recipients' responses. Structural estimation suggests that such negative externality derives both from resource constraints and recipients' preference changes: recipients reduce the utility weight attached to gift-givers who provide lower-value gifts