It’s impossible to shop for my cousin. Even when I get clothing from her favorite store, she never wears it. I’m so frustrated. Should I even bother trying to buy her something she may like?
Dear Gifting Grace,
I know exactly how you feel. Sometimes I wonder whether I should just give cash to my friends and family.
To decide, I thought we could look at research from University of Minnesota Professor Joel Waldfogel. When he asked students what they would have paid for a gift, the amount was 90% of its actual price. With your cousin and my family also, the gift’s value shrunk.
Explaining this economically, Dr. Waldfogel spoke of an “orgy of value destruction” and deadweight loss. But we should not despair. Cash gifts prevent the economy from experiencing such a loss.
As economists though, we cannot forget the tradeoff. You can prioritize the economy with cash or select sentiment with a physical gift. If you want to avoid hectic malls, don’t feel bad about giving cash. However, if you take joy in picking out the perfect gift, don’t deprive yourself.
So where are we? I suspect your best solution may be something in between. You can give your cousin a gift card to a restaurant or store. A gift card will retain its value and also show you put some thought into the decision.
I have only one warning. Be sure to select your cousin’s favorite place, not yours!
Please note that our question was based on what we have observed during the holidays.