Scholars working on the border of economics and psychology have documented many contexts in which individual decision-making is unreliable and might be improved by paternalistic interventions. Against this mounting body of negative evidence, economists' default belief in consumer sovereignty has been motivated primarily by theory rather than evidence. The goal of the present study is to see whether there is direct evidence supporting economists' faith in consumer sovereignty in a simple context. We address this question by presenting direct evidence that consumers' own purchases generate between 10% and 18% more value, per dollar spent, than items received as gifts.

When economists comment on holiday gift-giving, it is usually to condone the healthy effect of spending on the macroeconomy. However, an important feature of gift-giving is that consumption choices are made by someone other than the final consumer. A potentially important microeconomic aspect of gift-giving is that gifts may be mismatched with the recipients' preferences. In the standard microeconomic framework of consumer choice, the best a gift-giver can do with, say, $10 is to duplicate the choice that the recipient would have made. While it is possible for a giver to choose a gift which the recipient ultimately values above its price-for example, if the recipient is not perfectly informed-it is more likely that the gift will leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash. In short, gift-giving is a potential source of deadweight loss. This paper gives estimates of the deadweight loss of holiday gift-giving based on surveys given to Yale undergraduates.' I find that holiday gift-giving destroys between 10 percent and a third of the value of gifts. While these recipients may be unrepresentative of the U.S. population, their gifts are not necessarily unrepresentative. Holiday expenditures average $40 billion per year, implying that a conservative estimate of the deadweight loss of Christmas' is a tenth as large as estimates of the deadweight loss of income taxation. I also explore how deadweight loss and the tendency to give cash gifts vary with the relationship and age difference between giver and recipient. I find that gifts from friends and significant others are most efficient, while noncash gifts from members of the extended family are least efficient and destroy a third of their value. I develop a simple expected-utility model to explain the decision to give cash, as opposed to in-kind gifts. The data are consistent with the model: cash gifts are most common from the sorts of givers whose noncash gifts have the lowest expected value to recipients (given their cost) and high variability in recipient valuation.

Women have traditionally participated in intellectual property creation at depressed rates relative to men. Book authorship is now an exception: women now publish more than half of new books. Adding new products can have significant welfare benefits, particularly when product quality is unpredictable. Growth in female-authored books has delivered substantial increases in the female-authored shares of consumption, book awards, and other measures of success, indicating that the additional female-authored books are useful to consumers. The welfare benefit from gender-inclusive innovation is large and accrues to a wide range of consumers.

This paper develops implications of the selection hypothesis of Priest and Klein for the relationship between trial rates and plaintiff win rates. I find strong evidence for the selection hypothesis in estimated relationships between trial rates and plaintiff win rates at trial across case types and judges. I then structurally estimate the model on judge data, yielding estimates of the model's major parameters (the decision standard, the degree of stake asymmetry, and the uncertainty parameter) for each of three major case types, contracts, property rights, and torts.

We estimate a spatial model of liquor demand to analyze the impact of government-controlled retailing on entry patterns. In the absence of the Pennsylvania Liquor Control Board, the state would have roughly 2.5 times the current number of stores, higher consumer surplus, and lower payments to liquor store employees. With just over half the number of stores that would maximize welfare, the government system is instead best rationalized as profit maximization with profit sharing. Government operation mitigates, but does not eliminate, free entry's bias against rural consumers. We find only limited evidence of political influence on entry.

Scott B. Smart, Joel Waldfogel, Measuring the Effect of Restructuring on Corporate Performance: The Case of Management Buyouts, The Review of Economics and Statistics, Vol. 76, No. 3 (Aug., 1994), pp. 503-511

In the past decade Americans have increasingly turned their attention to nonlocal information sources, raising concerns about disengagement from local communities. Regulation sometimes seeks to curtail the integration of media markets through the promotion of “localism.” This paper examines the role of local media. We make use of the rapid growth of Hispanic communities in the United States to test whether the presence of local television news affects local civic behavior. We find that Hispanic voter turnout increased by 5 to 10 percentage points, relative to non-Hispanic turnout, in markets where Spanish-language local television news became available.

Libraries deliver the majority of US book consumption, and library costs are kept low by the first sale doctrine's guarantee that libraries can lend print books without additional compensation to publishers. However, publishers' decisions to restrict ebook access may threaten libraries. We measure impacts of holdings on circulation; and library holdings choices suggest that library managers value instances of ebook circulation more than print. We use a structural model of patron demand and library holdings to show that more restrictive print book terms would have ten times the negative patron welfare impact of an equivalent restriction on ebooks.

Why do people frequently cooperate in defiance of their immediate incentives? One explanation is that individuals are conditionally cooperative. As an explanation of behavior in one-shot settings, such preferences require individuals to be able to discern their opponents' preferences. Using data from a television game show, we provide evidence about how individuals implement conditionally cooperative preferences. We show that contestants forgo large sums of money to be cooperative; they cooperate at heightened levels when their opponents are predictably cooperative; and they fare worse when their observable characteristics predict less cooperation because opponents avoid cooperating with them.

The 44 Liquormart decision, eliminating Rhode Island's ban on liquor price advertising, made Rhode Island the subject of a natural experiment for measuring the effect of advertising on prices. Using Massachusetts prices as controls, we find that advertising stores substantially cut only prices of the products that they advertise. Prices of other products, at both advertising and nonadvertising stores, do not change. Advertising stores cut their prices on products advertised by rivals, while nonadvertising stores do not. We find no reductions in price dispersion across stores. Newspaper-advertising stores appear to draw a higher share of customers after they advertise.