This holiday season, many Canadians will skip the store lineups and give cash and gift cards instead. But did you know that some gifts could have an unintended effect on their recipient? Kim Parlee speaks with Nico Lacetera, Professor at the University of Toronto and Behavioural Economics in Action at Rotman School of Management, about the psychology of gift-giving and why experiences can sometimes be the greatest gift of all.
And here to give us some perspective on that with this Ask MoneyTalk question is Nico Lacetera. He's a professor of management at the University of Toronto and Behavioural Economics in Action at Rotman.
Nico, today's question is, how can I make the most impact with my holiday gift giving this year?
- Well, you know, by introspection, I think we can always all remember some gifts we didn't like to receive. And those are situations where we made a gift that we realized that the receiver didn't really like, like, say, an ugly sweater-- not yours. Yours is beautiful. But we give someone, and then we realize that someone never wears. So we might have, we thought, maybe wasted the money. And the economist in me might say, well, rather than spending $40 on a sweater the person might not even like, give them $30 cash. You save $10. They will spend those $30 on something that they probably value more than your ugly sweater.
But as soon as I say that, all of a sudden the gift seems very impersonal. So I guess the way one might think about gifts, about presents is to create a connection, to give a signal, a sense that you are thinking about the person you're giving the gift to, which doesn't mean it has to be something expensive or rare or super special, but something that relates you to the other person. And it could be as simple as a book or as more sophisticated as a painting, for example, but something that you do because you thought about what the other person might like and how that can create the connection between the two of you.
Mind you, it also depends on the situation. Sometimes grandma gives you money to save to buy a new cell phone or something like that. In that case, you're happy that grandma gives you some cash. So it might very well depend on the particular situation and, again, the kind of implicit agreements that you have with the other party. And of course, each of these agreements is special, is different. So you have to be aware of that.
- I guess this all comes down to just-- you talk about the connection, how you think about the person, how you communicate the gift. But also, I understand there's cultural differences, too. I mean, cash and gift cards are not always seen as impersonal. Sometimes they are.
- Oh, definitely. I mean, even in the country I come from, Italy-- and it's a relatively small country, but there are big differences on this particular topic, for example, between the north and the south of the country. So if there is a wedding in the south, the bride and the groom expect you to give them money. You put cash in an envelope and you give them money, and they're very happy. They don't see it as offensive or impersonal and so on.
Go in the north, and that would be really rude. In the north, you have to go with the wedding lists and buy the fifth, I don't know, item that they already have-- a fifth toaster. I don't know. But at least you thought about an object, which could be totally useless or very rarely used, but at least that's the norm.
So it's very specific to the particular culture, to the particular relationship, and to the particular situation. So if you go to someone's house and you didn't have time to buy a bottle of wine, would you go and give them $40 and say, listen, this is how much I would have spent for a bottle of wine, go and buy a bottle of wine?
Eh, I mean this sort of ruins the relationship there. The person gave you the courtesy to invite you to their house, and you're just trivializing it with something that is too fungible. Cash is great because you can do everything with cash. But for that same reason, it's not unique. It's not specific to the particular relationship. So there is a balance there to be solved.
- One of the other tricky things, of course, is also the pandemic that we're in. And experiences are a great thing to give people. Maybe tell us a bit about why you think that might be interesting, but with the realization, too, that we're in a pandemic.
- Yeah, so many think that giving an experience as a gift is more appreciated and more long-lasting than an object, per se. Of course, being stuck at home, or at least severely limited in our interaction, for example, we cannot travel. So the sort of quintessential experience is a trip, for example, a vacation. So we can't do that the way we could have done last year, for example.
I guess when we talk about experiences, maybe you might want to try and be a little broader. Anything that is durable and is personal and is special is an experience. If I give you a book that I know is by an author that you like, an author we talked about, for example, a long time ago, and I show you that I still remember that conversation, then all of a sudden you have something that you enjoy, that will stay there, and that reminds you of me and the conversation we had.
So in that sense, it is an experience. It is durable. Mind you, when we say "durable," not any durable is special. I mean, if I give you a dishwasher-- I don't know. That's a durable good, but perhaps it's less specific, it's less personal, it's less related to our particular relationship.
So in a sense, we might want to think a little broader about experiences, as long as we keep that sense of uniqueness and specialness, if you want, around the gift.
- Nico, I'll be happy if you give me any gift this year, but thank you very much for this.
- My pleasure.
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