An Irrational Guide to Gifts

I have recently been asking people around me what they think makes a good gift.  And I don’t mean specific items like sunglasses or one of my books (which are all excellent gifts); I was looking to find some of the basic principles and characteristics of good gifts.  One of the best answers I’ve gotten so far is this: “A good gift is something that someone really wants, but feels guilty buying it for themselves.”  What is interesting about this answer is that the ideal gift from this perspective is not about getting the person something that they can’t afford, or something that they have no idea that they want – it is all about alleviating guilt connected with the purchase of a highly desirable (yet guilt invoking) item.  So, lets consider two ways in which good gifts can eliminate guilt:
Case 1*: Imagine that you are walking by a storefront and you notice a beautiful coat that is just the right cut and color.  You walk in to check it out, and up close it is even more beautiful.  But then, you look at the price tag and you discover that it is about twice as expensive as you originally guessed, and after 30 seconds of painful deliberation you decide that you can’t possibly justify paying so much for a coat – and you go on your way.  When you get home, you find out that your significant other has purchased that same exact coat for you … from your joint checking account.  Now, ask yourself how you would feel about this. Would you say a) “Honey, this is very nice of you, but I have weighted the costs and benefits earlier and decided that this coat is not worth the money — so please take it back immediately” or b) “Thank you so much, I love it, and I love you.”  I suspect that the answer is b.  Why?  Because by getting you the expensive coat, your significant other got you what you wanted without making you contemplate the guilt associated with the purchase.
Case 2**: 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” a bit more?  You probably think that paying with cash will be a more miserable way of spending your money – but why?  Because, as Drazen Prelec and George Loewenstein showed, when we couple payment with consumption, the result is reduced happiness.  When we pay with a credit card the timing of the consumption of the food and the agony of the payment occur at different points in time and this separation allows us to experience a higher level of enjoyment (at least until we get the bill).


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