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Markets: Gift Cards

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  • Jennifer Pate Offenberg

Abstract

The Mobil Oil Company introduced the first retail gift card that recorded value on a magnetic strip in 1995. In under a decade, such gift cards replaced apparel as the number one item sold during the Christmas season. This study will discuss the reasons for the strong surge in the gift card market. It will then consider the value of gift cards as an intermediate option between two alternatives: purchasing a physical gift, which could possibly be returned or exchanged, versus giving cash. Empirical data on the resale price of gift cards from an Internet auction website provide information on the value that recipients place on gift cards suggesting that the difference between the cost of a gift card to the giver and its value to the recipient is substantial, although perhaps not quite as large as the parallel gap involved in physical gifts.

Suggested Citation

  • Jennifer Pate Offenberg, 2007. "Markets: Gift Cards," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 227-238, Spring.
    • Handle: RePEc:aea:jecper:v:21:y:2007:i:2:p:227-238
    Note: DOI: 10.1257/jep.21.2.227
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.21.2.227
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    References listed on IDEAS

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    1. List, John A & Shogren, Jason F, 1998. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 88(5), pages 1350-1355, December.
    2. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-1336, December.
    3. Webley, P. & Lea, S. E. G. & Portalska, R., 1983. "The unacceptability of money as a gift," Journal of Economic Psychology, Elsevier, vol. 4(3), pages 223-238.
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    Cited by:

    1. Zhang, Qinhong & Zhang, Dali & Segerstedt, Anders & Luo, Jianwen, 2018. "Optimal ordering and pricing decisions for a company issuing product-specific gift cards," Omega, Elsevier, vol. 74(C), pages 92-102.
    2. Khouja, Moutaz & Rajagopalan, Hari K. & Zhou, Jing, 2013. "Analysis of the effectiveness of manufacturer-sponsored retailer gift cards in supply chains," European Journal of Operational Research, Elsevier, vol. 230(2), pages 333-347.
    3. Khouja, Moutaz & Pan, Jingming & Zhou, Jing, 2016. "Effects of gift cards on optimal order and discount of seasonal products," European Journal of Operational Research, Elsevier, vol. 248(1), pages 159-173.
    4. Principe, Kristine E. & Eisenhauer, Joseph G., 2009. "Gift-giving and deadweight loss," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 215-220, March.
    5. Gunasti, Kunter & Baskin, Ernest, 2018. "Is a $200 Nordstrom Gift Card Worth More or Less Than a $200 Gap Gift Card? The Asymmetric Valuations of Luxury Gift Cards," Journal of Retailing, Elsevier, vol. 94(4), pages 380-392.
    6. Flora Felso & Adriaan R. Soetevent, 2012. "How Consumers use Gift Certificates," Tinbergen Institute Discussion Papers 12-002/1, Tinbergen Institute, revised 27 Nov 2013.
    7. Lesley Chiou & Jennifer Pate, 2010. "Internet Auctions and Frictionless Commerce: Evidence from the Retail Gift Card Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(3), pages 295-304, May.
    8. Laura Birg & Anna Goeddeke, 2016. "Christmas Economics—A Sleigh Ride," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1980-1984, October.
    9. Lusk, Jayson L. & Weaver, Amanda, 2017. "An experiment on cash and in-kind transfers with application to food assistance programs," Food Policy, Elsevier, vol. 68(C), pages 186-192.
    10. Felső, Flóra Á & Soetevent, Adriaan R., 2014. "Broad and narrow bracketing in gift certificate spending," European Economic Review, Elsevier, vol. 66(C), pages 284-302.
    11. Carlson, Jay P. & Paul, Iman, 2022. "Pick a card: Price ranges and gift card choice," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).

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