Measuring following behaviour in gift giving by utility function: statistical model and empirical evidence from China

Abstract

AbstractGift giving is a prevalent social custom, particularly in Chinese society. Since people do not act independently of social norms, they are also motivated by the views of others when giving gifts. However, there is no existing literature on this important topic for China. To fill this gap, based on the law of diminishing marginal utility, this study investigates the effects of social conformity on gift giving in China. A relative index is constructed to capture the following behaviours in gift giving. The likelihood of following behaviours is measured by a statistical model derived from utility functions. Panel and dynamic ordinal discrete regressions are employed for empirical analysis. A case study in China employing a nationally representative longitudinal dataset with 37,147 individuals over three periods is applied. The results show that overall, more than half of the population in China tends to follow others in regard to gift expenses. However, from 2014 to 2018, this tendency declined sharply. Men are more likely to follow their peers in gift expenditure than are women. Older people have a lower preference to follow others than young people. More specifically, the assumption of diminishing marginal utility in gift giving is fully supported by the empirical findings in this study.