Gift Exchange under Sources of Uncertainty

44 Pages Posted: 12 Jan 2021

See all articles by Yiting Chen

Yiting Chen

National University of Singapore (NUS), Department of Economics

Songfa Zhong

National University of Singapore (NUS) - Department of Economics

Date Written: October 2020

Abstract

Decision making under uncertainty depends not only on the likelihoods but also on the sources of uncertainty in terms of the degree of ambiguity, competence, and familiarity. This study goes beyond valuation experiments to examine the source dependence in the setting of gift exchange. We randomly assign 4,203 Amazon Mechanical Turk participants to different conditions, under which they receive a lottery as a gift to motivate their performance on a real effort task. These lotteries vary in both the likelihood of winning and the source of uncertainty---betting on the stock index of a familiar or an unfamiliar region. We observe a twofold pattern: The lottery with the familiar (unfamiliar) source of uncertainty motivates higher effort when the likelihood of winning is moderate to high (low). Moreover, effort exhibits more insensitivity to the likelihood of winning under the unfamiliar source compared with the familiar source. Our findings support the generalizability of source dependence in applied settings.

Keywords: risk, uncertainty, source dependence, gift exchange, experiment

JEL Classification: C91, D81

Suggested Citation

Chen, Yiting and Zhong, Songfa, Gift Exchange under Sources of Uncertainty (October 2020). Available at SSRN: https://ssrn.com/abstract=3737974 or http://dx.doi.org/10.2139/ssrn.3737974

Yiting Chen (Contact Author)

National University of Singapore (NUS), Department of Economics ( email )

Singapore
Singapore

Songfa Zhong

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

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