4/14/2005

The Real Lump of Coal in Christmas.

What is the lump you ask? Deadweight loss. The article “Is Santa a deadweight loss?” states on average, a gift valued by the recipient well below the price paid by the giver. The most conservative estimate put the average receiver's valuation at 90% of the buying price. Where givers spend $40 billion on Christmas gifts, at least $4 billion is being lost annually. What to do? The best present is cash it is the most flexible. Next Christmas, ask for and give cash.

1 comment:

Dr. Tufte said...

The transformation of all of you into emotionless economists is complete!

Bwooahahaha.

On a saner note, the real trick here is explaining why it is optimal and rational for us to give gifts to each other if recipients prefer cash? One answer may be that we are also giving the gift of the time we spent shopping - which may be more valuable to the giver than the cash we spend (suggesting that we care about the recipient enough to shop for them).