Does gift competition hurt? An experimental study of multilateral gift exchange

Bilateral gift exchange is often shown to benefit the gift-giver, but the effect is largely unknown when gift competition exists in a multilateral interaction. This paper studies gift competition in two-giver-one-recipient interaction based on a real-effort task on the recipient side. We find that exogenously introducing gift competition opportunity benefits the recipients and hurts the givers. This is because recipients respond more to the relative than the absolute size of the gifts under limited resources (i.e., time in our case). Explanations based on recipients’ preference change and givers’ erroneous beliefs are investigated and excluded.