This weekend I was with my parents at brunch when they reminded me about how in High School at the end of every sports season there was always a coaches gift. I never thought much of this but now, analyzing the situation with an economic lens, I can now see how large the threat of free riding is in this kind of scenario. Group gifts allow you to benefit the same amount whether you donate nothing or a sizable amount, because the gift recipient cannot differentiate between those who contributed versus those who did not.
This is a real world example of the limitations of the Coase Theorem. It is non-excludable meaning you cannot exclude anyone from the enjoyment of being part of the gift giving group unless you were to list out the contributing individuals, which is social taboo. It is also non-rival, meaning that one individual's contribution does not limit another's ability to contribute. This is an example of market failure because the group gift will be underproduced; people can contribute less and hide behind the shield of saying "it's from all of us."
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