Why Gift?

Many people spend huge amounts of time and money trying to come up with that “perfect” gift, but is it worth it?

Gifts are a way of connecting individuals to one another. Sentimental gifts given between close parties are highly beneficial as well. These gifts have oftentimes the most thought and care put into them. They may not have the most monetary value but they mean the most to the gifter and receiver. Another way gift-giving is highly beneficial is when a gift is given to a recipient who isn’t in a current position to afford said gift. For example, charity services or parents supporting their kids. Most gifts, however, aren’t tied to a lot of sentiment and end up sitting in a corner collecting dust. They are given between two parties and often, those individuals aren’t close to one another. Unsentimental, “courtesy” gifts are often given “just because”. It could be because your coworker gave you a gift last year, so you feel obligated to give something back or you’re going to a party and need to bring something along. Most gifters end up expecting some sort of compensation in return, whether that be money, loyalty, a present or simply feeling better in the future, which goes against the whole idea of giving gifts in the whole place. On average, the receiver values the gift less than the actual buying price. The difference between the value the gifter puts into the gift and the value the receiver feels creates deadweight loss. The best solution to fix this is simply just giving cash, but people don’t necessarily think rationally, especially around the holidays. During the holiday season, almost every store has some sort of deal to incentivize you to buy something you previously didn’t want or need. Consumers see these deals and often think that they would make great gifts because they want them, therefore the receiver must want them just as much. Due to not having perfect information, not knowing what the receiver truly wants, consumers overspend on gifts that realistically will either end up getting re-gifted or thrown into a box. When it comes down to deciding what to give another individual as a present, the real question is, does it mean something and/or do they really need/want this? If it’s just a “courtesy” present it might be better off to get them some form of money, which would help avoid creating any deadweight loss.

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