Satisfaction-maximising gifts versus favour reaction-maximising gifts.

A recent research paper entitled “The Smile-Seeking Hypothesis: How Immediate Affective Reactions Motivate and Reward Gift Giving” by Adelle X. Yang, Oleg Urminsky discussed the fact that when we decide on gifts for others we often do not choose what the recipient really desires. It is assumed that the person giving the gift wants to be rewarded with a non-monetary currency called ‘gratitude’ – this can be in the form of hugs, kisses and smiles. It is the latter (smiles) that the research focuses on and asks the question is gratitude creating poor incentives. Prior research has generally explained such preference mismatches as decision makers mispredicting recipients’ satisfaction. They propose that “smile-seeking” motive is a distinct cause for these mismatches in the context of gift giving.

The gift giver has the choice of getting an affective reaction to the gift versus the gift’s long-term utility – satisfaction. Adelle X. Yang, Oleg Urminsky framed an experiment around Valentines Day. They picked 3 pairs of appropriate gifts – one of which would be more likely to induce an appreciative response versus a gift more likely to have more long-term satisfaction:

They recruited 295 volunteers online on 13th February, the day before Valentine’s Day, in order to standardise and have an appropriate mood. They were asked the following:

  • Men were asked which of each pair they would give as a gift
  • Women asked which they would prefer to receive
  • Men and women asked to predict how much affection would be displayed by the receiver for a particular gift and which would create the greater long-term utility.

Results

Men seemed to go for the gift that would induce hugs and smiles over the long-term satisfaction of the present. Women on the whole were the opposite except for the biscuits and the fruit – the majority of women preferred the sugar boost over the long-term benefit of healthy fruit. This is despite what they had said about the long-term value of fruit.

If the gratitude market was working correctly the long-term option would be more appropriate.

Cash as a gift – is it rational?

I have blogged on this topic before using an episode of Seinfeld. It seems rational that Jerry gives Elaine $182 for her birthday but it really is inappropriate. Cash replaces social norms by market norms and ruins the feelings usually evoked by a typical non-cash birthday gift. The deadweight loss of giving is the loss of efficiency that occurs when the value of the gift to the recipient is less than the cost of the gift to the giver. In this case, economists argue that cash would be a more efficient gift. See video below.

Source: The Economist ‘The Economics of Gifts’ –  June 30th 2018

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