Gift Giving and Economics

Ross Gittins is one of my favourite columnists writing for the Sydney Morning Herald, and I personally find one of his latest article, "So, Scrooge was right after all", very interesting. In the article, he pointed out that the economists could not understand why people give gifts on Christmas, because it is not economical at all, because in most cases receiver would value the gift less than what the giver values. For example, I might receive a brand new coffee plunger for Christmas, that I would value $20, because I have already receive 3 similar gifts from previous Christmas. However, it might cost the giver $50 to purchase from the department store. Therefore overall there is actually a negative growth of economics.

But the fascinating thing is why do people continue giving gifts in all occasions? Hidden consideration? Optimising search cost? Emotions?

Tomorrow I will be going to Vicky and Cristen's weddiing, and searching for a wedding gift has never been my strength. The search cost is just too high - I simply just can't pick gifts. So these days we usually just give red pockets (yeah, we are Chinese) instead of shopping for gifts, which is economical - it does not take us much time to search and prepare, and my valuation and another person's valuation would always be the same.

And I hate to repeat the history. I did get 3-4 coffee plungers for my own wedding.