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The Deadweight Loss of Diwali

Waknis, Parag and Gaikwad, Ajit (2006): The Deadweight Loss of Diwali.

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Abstract

Using survey responses of undergraduate students from a college in India, we conducted an empirical analysis of efficiency of non-monetary gifts exchanged on the occasion of Diwali similar to analysis for Christmas in Waldfogel (1993). We found an average deadweight loss of 15% on all gifts, with gifts of accessories and electronic goods showing a lower loss compared to other types of gifts. We also found that lesser the generational distance between the person gifting and the receiver, lower is the deadweight loss. In addition, there is weak evidence supporting differences in valuation of gifts based on closeness of familial ties as understood in this cultural context. We, however, did not find any systematic difference in valuation of gifts by gender of the recipients.

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