the deadweight loss of gift giving”.
It’s the value (or price) that’s destroyed when the gift changes hands. Or put more simplistically, it’s the gap between how much the gift giver spent and how much the receiver values the gift. (View Highlight)
the economist Joel Waldfogel had some numbers to back this theory.
In 1993 , he rounded up 86 undergraduate students and asked them if they liked their Christmas gifts. But a mere ‘yes’ or ‘no’ wouldn’t really tell him anything. So he asked them, “How much would you have paid for the items you were gifted?”
And what did he find?
Well, the actual gifts cost a total of 438.20.Butthestudentswereonlywillingtopay313.40 for these gifts. He repeated the study a couple of months later. And the results were the same. So in principle, gifting something automatically erodes its value by 10–30%. (View Highlight)
In 2017 , Parag Waknis, an associate professor at Ambedkar University Delhi and his co-author surveyed college-going students in Maharashtra about Diwali gifts. They found that there was an average deadweight loss of about 15%. (View Highlight)
you ask people, “How much money would you accept in order to give the gift away?” What do people say then? Well, that’s what researchers Thomas K. Bauer and Christoph M. Schmid wanted to figure out.
So they posed this question to university students in Germany.
And the result?
Well, on average, students wanted 18% more than the gift’s market price to give it away. They wanted more money now. (View Highlight)
This is classic behavioural economics at play. It’s a phenomenon known as the endowment effect. Once we ‘own’ something, we tend to overvalue it. So if you were gifted a Fossil watch, and someone came to you and offered the market price, you wouldn’t give it away. Even if you didn’t want or like the watch in the first place. You’d want a lot more money to part with it. (View Highlight)
But there’s one caveat to both these experiments. They were conducted by economists. And here’s the thing about economists. They make a lot of assumptions. For instance, they think human beings are rational. But we aren’t. We are emotional beings. And since economists ignore “the ‘sentimental value’ of gifts, these experiments are never perfect. (View Highlight)
