Gift Economies vs. Transactional Economies

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Gregory Rader on Comparing Comparative Advantage

Gift economies will predominate where:

Participants basic needs have already been met through transactional economy or can be achieved through gift economy

Market participants can build and maintain functional relationships

- Geographically connected - Communication and/or reputation tracking is possible and efficient - Relationships are ongoing - repeated games

Productivity is heterogeneous

- Value of a unit of work varies significantly between people or between distinct efforts from the same person

Products are individually differentiated, unique or personalized - gift like

- Products derive their value from being unique or personalized - Perceived value differs significantly between recipients/consumers - Price Discrimination dramatically increases distributive efficiency*

Value is difficult to judge

- Few identicals or comparables exist - Practical value is not immediately obvious - Supply and demand are difficult to observe, measure, or quantify

Interactions are reciprocal and networked

- Market participants produce and consume similar sorts of value - reciprocation in kind is possible - Production is collaborative or networked - Participants' roles are flexible - creativity is enabled - Participants accept and value personal connections

Participants are intrinsically motivated or enjoy process of production

Transactional economy will predominate where:

Participants are striving to meet basic needs that can only be achieved through transactional economy

Market participants are functionally anonymous

- Distance is a barrier to trust or rapport - Lacking modes of direct communication - One time transactions (no repeat games) - i.e. transactions with outsiders

Productivity is homogeneous

- Most productive effort can be consistently valued and priced in terms of common currency

Production is standardized, lacking differentiation or personalization

- Products derive value from satisfying ubiquitous wants or needs - Perceived value varies relatively little between consumers - Price Discrimination is not critical*

Value is easy to ascertain

- Identicals or comparables exist - Value of product in practice or practical usage is obvious - Supply and demand are observable, measurable, or quantifiable

Interactions are one sided and linear (production/supply chain flows in one consistent direction)

- Production is linear

-- Supply chain proceeds directly from producers through distributors to consumers 
-- Market participants have fixed roles 

- In a given domain one party is always the buyer or seller - Market participants prefer to remain anonymous (efficiency is preferred to intimacy)

Participants lack intrinsic motivation and/or production is a chore " (