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Dhaka Tribune

The secret to the best gifts

Update : 16 Apr 2013, 12:57 PM


Behavioral economics offers some clues to this guilt-centric approach. Consider the following scenario, based on research by Dick Thaler: You are walking by a storefront and you notice a beautiful coat that is just the right cut and color. Up close it is even more beautiful. Then you discover that it is about twice as expensive as you had originally guessed. After 30 seconds of painful deliberation, you decide that you can't possibly justify paying so much for a coat.

“The ideal gift is not something that the recipient can't afford or didn't know he/she wanted.”

When you get home, however, you find out that your significant other has bought you that same exact coat…using money from your joint checking account. Would you say, "Honey, this is very nice of you, but I have already weighed the costs and benefits and decided that this coat is not worth the money, so please take it back immediately"? Or would you say, "Thank you so much, I love it!" I suspect that the answer is the latter. Your significant other got you what you wanted without making you contemplate the guilt associated with the purchase.

Another paper, by Drazen Prelec and George Loewenstein, lays out a different scenario: Imagine that you have just finished a fantastic meal and have the option to pay with cash or with a credit card. Which one will "hurt" you more? Most people say that paying with cash is more miserable—but why? As Messrs. Prelec and Loewenstein showed, when we couple payment with consumption, the result is reduced happiness. When we pay with a credit card, delaying the agony of the payment allows us to experience a higher level of enjoyment.

Let's take this example one step further. Imagine that I own a restaurant and calculate that, on average, people eat 50 bites and pay $50. One day you come to my restaurant and I tell you that because I like you so much, I will charge you half price—only 50¢ per bite. In addition, I will charge you only for the bites you eat. What I will do is serve your food, stand next to you with my notebook and mark each bite you take.

Most people would agree that this is a fantastically cheap meal relative to the regular price, but I also suspect that most of us wouldn't consider it much fun. Every time you took a bite, you would think, "Is this worth it?" and, in the process, not enjoy the meal at all. Woody Allen might have captured the gist of the "pain of paying" best in "Manhattan" when he turns to his date during a taxi ride and says, "You look so beautiful, I can hardly keep my eyes on the meter."

What these principles tell us is that the best gifts circumvent guilt in two key ways. They eliminate the guilt that accompanies extravagant purchases, and they reduce the guilt that comes from coupling payment with consumption. That's why gift certificates for dinner, drinks, iTunes, movies and so on are so popular. They not only encourage people to experience something new, they let them experience it without any psychological burdens or the pain of paying.

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