Saturday, December 24, 2011


If I recall correctly, gifting is a practice that has negative overall utility. Prior experiments found that recipients of gifts tended to discount the value of the gift; for example, if a gift had cost $10, they deemed the gift to be worth less than $10. Perhaps unsurprising, given that gifts have a poor record of being exactly what people want. In the optimal case, gifts are exactly what you want, in which case nothing is gained over the case where you spend the money to acquire the item directly. In the worst case, you receive rubbish (from your point-of-view) and are worse off.

My analysis suffers from an assumption, which may be untrue. It assumes that the costs of gifts are equal for all people, i.e. you can't get the same gift at a lower cost than I can. However, sometimes this assumption is untrue. If one is able to obtain items at a discounted cost, then gifting makes sense. For example, if I were an artist, it is preferable to give people my artwork, since it does not cost me as much to 'buy' it as it does others. An alternative possibility is to gift others with items that you value poorly with respect to their generally perceived value; for instance if you hate bananas and happen to have some bananas, giving others the bananas is likely to improve the overall utility of the gifting scheme.

To summarize:
  1. Gifting is generally bad for everyone, unless,
  2. You give people something that you have a competitive advantage in procuring, or
  3. You give people stuff you hate.
 I find the third conclusion particularly interesting. I believe it should be combined with the conclusions from my previous article on "Free Gifts".

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