Wednesday, December 19, 2018

More On The Economics Of Gift Giving

Yesterday's post was "Is Christmas Gift Giving Inefficient?" The idea is that you might buy a gift for $30 but the person receiving it only values it at $20. 

See The science of giving gifts your loved ones won’t want to return by Kathleen D. Vohs, professor of marketing at the University of Minnesota. Excerpts:
"First, should we give gifts at all? Some economists think gifts — unless they’re cash — are a waste of money, pointing with horror at the “deadweight loss” that occurs when people give each other goods that don’t mesh precisely with what consumers would have bought for themselves. “Holiday gift-giving destroys between 10 percent and a third of the value of gifts,” the economist Joel Waldfogel has written.

But that mind-set misses the point of gift-giving — and it’s just plain unromantic. The value of a gift extends beyond the price of the item and its raw usefulness to include sentimental value, and this second kind of value can be empirically measured. One study from researchers at the University of Florida and Carnegie Mellon University demonstrated that people valued comparably useful objects more highly when they were gifts, as opposed to when they were self-purchases. What’s more, while the pleasure derived from all new acquisitions wanes over time, broadly speaking, the part of a gift’s value that comes from sentimental attachment is largely immune to decline, the study found."

"When most people think of a successful gift, they picture the recipient beaming and exclaiming with delight; marketing professors from the National University of Singapore and the University of Chicago call this the “smile-seeking” motive, and it’s rewarding for the giver. But it can lead you to buy something that scores higher on the initial “wow” factor than on long-term satisfaction. Fresh flowers or a big basket of sweets may get a big reaction, but a book, a cactus or an elegant serving bowl delivers happiness over months or years, and is therefore ultimately more satisfying."

"According to marketing scholars at Emory University and the University of Texas, people who are personally close to a recipient are especially inclined to ignore wish lists, and to seek out something distinctive and “just right.” But going rogue in that way leads to presents that recipients like less than gifts they asked for, the study found."

"For the past 15 years or so, the received wisdom in behavioral economics has been that buying experiences, or giving them as gifts, produces more happinessover the long run than purchased material things do. So instead of buying your sister a kitchen mixer, for instance, consider a gift of cooking lessons from a local chef.

Experiences are thought to trump material goods for several reasons, chiefly because people tend to use material things on their own, whereas experiences are often shared with others. And material goods are easily compared against rival goods, or against things friends and acquaintances own, which fosters discontentedness. Experiences are more idiosyncratic, effectively blocking such comparisons.
Yet other researchers have recently pushed back against the “buy experiences” conventional wisdom. Two academic psychologists at the University of British Columbia found that objects received as gifts tend to produce modest and consistent happiness, whereas experiences given as gifts sparked brief, intense bursts of happiness."

"At moments in life worth celebrating, material goods beat out experiences as gifts, according to researchers from Ohio State University and Washington University, because those objects can evoke memories and feelings of meaningful events for years to come."

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