The Science of Gift Giving

December 19th, 2019
Christmas is on the doorstep, which means tough decisions, budget allocations, and last-minute shopping. If you're like most people, then you probably approach gift giving with a combination of random luck and hours walking the streets. As it turns out, however, there is a clear and robust science behind gift giving, with people who receive gifts much more appreciative when decisions are based on thoughtful consideration and long-term value rather than immediate satisfaction and price.

Australians spent a cumulative AU$11 billion during the 2018 Christmas period on gifts alone, which amounts to an average spend of AU$573 per person. Kiwis spent slightly more on average when you account for currency conversion, with NZ$624 per person spent on gifts last Christmas. Most shopping takes place in the week leading up to December 25, with millions of people still hitting the pavement on Christmas Eve.

While giving gifts to your loved ones is supposed to spark happiness and joy, making the wrong decisions can also have the opposite effect. According to Elizabeth Dunn, psychology professor and co-author of Happy Money: The Science of Happier Spending, "Choosing the wrong gift can be kind of risky for relationships because it says you don’t have anything in common." Distinguishing good gifts from bad can be hard, however, with givers and receivers often looking for very different things.

According to a recent study from the Carnegie Mellon Tepper School of Business, giver-recipient discrepancies can be partly explained by separate notions of gift quality. While givers focus primarily on the moment of exchange, recipients focus primarily on how valuable a gift will be on a long-term basis. Instead of fixating on the initial "wow factor" and smile as the reward, gift givers should learn to give for the sake of giving alone. ;

According to Jeff Galak, co-author of the study entitled "Why Certain Gifts Are Great to Give but Not to Get: A Framework for Understanding Errors in Gift Giving", “When givers give gifts, they’re trying to optimise on the moment they give the gift and see the smile on the recipient’s face right in that moment... But what recipients care about is how much value they’re going to derive from that over a longer time period.”

As it turns out, a little consideration goes a lot further than a big cheesy grin or even a deep wallet. “It seems pretty intuitive that if you spend more, you’re going to get a better gift. It turns out that there’s no evidence that recipients are sensitive to the cost of a gift when they figure out how much they’re going to enjoy that gift,” said Galak, adding “it doesn’t matter if you buy something more valuable.”

Along with focusing on long-term value and forgetting about price, successful gift giving is also about thoughtful consideration. According to Professor Dunn, the uniqueness of the gift is not as important as many people think, nor is the fact that you chose the gift yourself. Asking people what they want is the best way to ensure satisfaction, with gifts based on shared interests and common values another sure fire method of success. ;