You may have heard of, or are familiar with, the concept of gift mismatch. A notable AER paper, ‘The Deadweight Loss of Christmas’ by Waldfogel (1993), discussed this issue. Spanning just ten pages, the paper masterfully intertwines elegant theory with convincing experimental evidence.
At its core, the paper examines the difference between a gift’s cost to the giver and its perceived value to the recipient. This difference, primarily measured in monetary terms, is termed the “deadweight loss” of gift giving. The study reveals that our skewed perception of others’ preferences can lead to a 10%-30% value mismatch, translating into significant economic loss—surpassing even the inefficiency caused by taxation.
I wholeheartedly recommend this insightful paper for a thought-provoking morning read or as an enriching addition to your literary collection. From an economic standpoint, it’s true that gifts can result in deadweight loss. Thus, when selecting Christmas presents, it’s wise to aim for choices that closely align with the recipients’ preferences.
However, I propose an additional angle to consider. This Christmas, why not slightly broaden the circle of people you usually gift to? Extend your generosity to those on the periphery of your usual gift-receiving group, who might not have initially crossed your mind.
This approach is beneficial for two reasons. Firstly, the value of a gift can be bifurcated into monetary and emotional components. The latter, being highly subjective and malleable, can vary greatly if skillfully presented. Surprising someone unexpectedly can significantly boost the emotional value of a gift, especially when it makes the recipient feel noticed and valued. A modest gift to an acquaintance, for instance, can leave them pleasantly surprised and feeling appreciated, which is invaluable. Moreover, this gesture doesn’t require an extravagant expenditure. A small, thoughtful gift can have a high emotional impact at a relatively low monetary cost, enhancing a social connection with a simple act.
As Christmas and the New Year approach, I encourage you to try this alternate gifting method. Extend your generosity not only to your closest colleagues and mentors but also consider small tokens for others in your circle—like the class you teach, a professor of a lesser-known course, or acquaintances you frequently encounter but seldom engage with. Regardless of the economic or social benefits anyway, such gifts have the potential to brighten someone’s day in an extraordinary way.