Wednesday, October 31, 2012

Economics of Giving out Candy

As I go to the store to buy candy to hand out to children trick or treating this evening, I got to thinking what are the economic motivations for handing out candy and what factors influence the likelihood a house will give out candy?

Since I'm spending money on the candy, basic economic theory would suggest I get some utility (happiness) out of giving candy to children. My wife and I do enjoy seeing kids in their costumes. We also like to feel like we are part of the neighborhood. Of course we will take our own child to a few houses of friends and hope friends will come to our house.

With that in mind. A simple theory of what induces people to hand out candy. First, it is what some economists would call an institution or social norm (or we do it because everyone else is doing it). Just like we are expected to do many things even without an obvious benefit, because they are part of the culture. Social norms tend to be stronger in more integrated communities. So I would guess there is a correlation between how often neighbors socialize and if they hand out candy. Furthermore, I would guess that neighborhood with households of similar backgrounds in terms of culture, race, and income level would be more likely to hand out candy. Related there is a reciprocity aspect too, if you have kids who go trick or treating you probably feel worse if you don't hand out candy than someone who doesn't have kids.

What about income and trick or treat candy? My guess is that as incomes go up people generally are more likely to hand out candy. This may not be true on the highest end as high incomes may mean more isolated houses or people with higher opportunity costs. Neighborhood walk ability also has something to do with trick or treating.

So far I'm treating this as a supply side issue. Of course there are the trick or treaters who demand candy. One could also worry of the threat of egging if no candy is handed out (although that seems doubtful). Related when we lived in an apartment there was no demand for candy, so we were left with a large surplus (we quickly changed from suppliers to consumers of candy solving the issue).

Finally, looking back 4 years ago I made a Halloween post. Since then the trick (stock market down) and the treat ($2 gas) have reversed with the market and gas prices up substantially

Of course what Halloween post would be complete with a scary costume....

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