Does the Thought Really Count?: An Economic Analysis on Gifts

So a friend of mine asked me if my family engages in the traditional Western culture of having gifts under a Christmas tree. For as long as I remember, we’ve never even had a Christmas tree. In fact, one particular christmas when things were tougher, we couldn’t afford a chicken. Anways, we did get ‘Christmas Clothes’ which seemed to be the one ubiquitous gift Nigerian kids got. As we got older though, gifting during Christmas and other celebrations became more complicated- as with everywhere else around the world. With this complexity came the easy way out: buy a gift and hope the receiver believes in the “it’s the thought that counts” speech. But, is it that simple or is gifting more complex than it seems to be? Maybe this analysis might reveal the answer.

Before we continue, let’s understand the different demographics that exist in this world of gifting. We obviously have the ‘Gifters’ and the ‘Giftees’.  The Gifters give the gifts and the Giftees receive the gifts. (Bear with the coinages; I was too lazy to come up with something more creative).

Two Types of Giftees: 

Easy Giftees: These chaps are highly sentimental. So, they’re into the ‘thought of the gift’ than the gift itself. The effort placed into acquiring the gift matters more to them than the gift itself.

Difficult Giftees: These chaps have low sentiment levels, so they’re particularly apprehensive about the gifts they receive. They secretly prefer to get exactly what they want, hence they experience a drop in utility when they don’t. They’re those people who might feign happiness, but will be disappointed you got them a brown pair of shoes rather than a black pair. I might be in this group…damn ingrates.

 Two Types of Gifters: 

Stress Haters: This group hates the process of searching for the right gift. They’d rather just gift out cash because it saves them the stress of shopping. They might also see it as a way of avoiding trouble if the gift isn’t right.

Stress Lovers: You know those people who just seem to love shopping for gifts, even when it takes a lot of stress and time? Yes, those are the stress lovers.

So what happens when these two pairs of Gifters and Giftees interact? The table below has those simulations:

Stress Lovers (Gifts) Stress Haters (Money)
Easy Pleasers Great! Mehh
Difficult Pleasers Mehh or Great Great!

As you can tell from the table, getting it right with gifts can be quite tricky and more complex than we assume it should be.

Scenario 1:

The combination of Stress Haters with Difficult Giftees ends up in a weak Pareto optimal state (where there are no possible alternative allocations whose realization would cause every individual to gain). The Giftees who are difficult to please get cash to buy exactly what they would like and the Gifters who hate the stress of finding the right gift simply take the easy route of gifting money. Both sides win!

Scenario 2:

The Stress Lovers who go out of their way to buy gifts might get it right or wrong with the Difficult Giftees. If they get the ‘wrong’ gift, it could end in a not-so-great conclusion. But when they get the right gifts for the difficult Giftees, it ends amazingly well. For example, I got an iPad mini Retina from my mom. Doesn’t get any better than that.

Scenario 3:

For easy pleasers, since it’s the ‘thought that counts’, they tend to be happy as long as you get them gifts. However, the utility of a gift tends to be higher when more effort is placed into acquiring the gift. For example, an easy pleaser would be happier if you walked around 5 shops to find that particular bag he/she likes than if you simply one-clicked it on Amazon. A tad bit sadistic, I’d say…

Scenario 4:

Likewise, their high sentiment level means they’re not so happy when one simply gifts them cash. They view it as a lazy effortless thing to do.

Advice: don’t gift your partner money on your anniversary-it better come with something sentimental or something that demonstrates effort: dinner at a French restaurant , flowers, a nice tie, or a lovely dress.


So, what’s the best way to come out of these scenarios like a the most thoughtful individual in the world? You can start with the assumption that uncertainty is endogenous to the Gifting model. (It would be somewhat lame if you knew exactly what gift you would be receiving every time. We also wouldn’t need this model if Gifters automatically knew the perfect gift to give.) Consequently, the presence and absence of uncertainty can help us figure out what method to apply best. Evidently, the best thing to do would be to clear out uncertainty on the side of Gifter and keep uncertainty on the part of the Giftee. This way, easy Giftees end up happier cause they observe that a lot of thought and effort went into the choice of gift. Also, difficult Giftees get exactly what they want or at least close to what they would get for themselves. Their utility is further maximized as getting the right gift cuts out the hidden cost associated with a monetary gift- the cost of purchasing exactly what they want themselves.

Without the need for any of this economic mumbo jumbo, I’d advice you to find out the preferences of your partner/friend/family member from her relatives or close friends in order to get her something she’d love. It helps to know the preference of individuals and gift accordingly…well, within cost feasibility of the gift. I got a Manchester United Jersey from a close friend two years ago and I still cherish it till today.

On the other hand, screw it up and that gift could hurt your relationship with the Giftee. For example, you wouldn’t get your partner who loves Taylor Swift a ticket to a 2 Chainz concert, would you? It would be a colossal failure to get your boss a pink baby skirt for his obviously male child. And if I knew Dangote personally, I wouldn’t gift him N5,000 for Christmas, I’d gift him something personal. For those who’ve seen ‘Breaking Bad’ (great show), Walter White gifts his millionaire ex-business partner a packet of Chinese Noodles. His friend highly valued the gift because it had sentimental value attached to it: it reminded him of times when they’d stay up late working on scientific equations. At that point, other more expensive gifts meant little to the millionaire compared to the packet of noodles. That’s the power of gifting something personal.

The core function of a gift is to act as a signal of affection. It should show that you care. And what better way to show that you care for someone than to take some time out to find out their preferences and get them a gift accordingly. So yes, for the best gifts; the thought does count.

PS: For those planning to send me a gift, I love gadgets-especially Apple products.

  • Imal Emmanuel Silva

    Lol!! Keep ’em coming bro!