Freakonomics in the Times Magazine: Gift-Card Economy

In their Jan. 7, 2007, column for the New York Times Magazine, Dubner and Levitt ask the question we’ve all been asking: What do a gym membership, a bottle of prescription pills, and a holiday gift card have in common?

This blog post supplies additional research material.

Click here to read the column and here to comment.

According to “Paying Not to Go to the Gym,” a paper by Stefano DellaVigna and Ulrike Malmendier, people overestimate how much they will use their gym membership by more than 70 percent. Many people determine an annual membership to be the better value when the data show that for the majority, it is clearly not.

People who are prescribed self-administered medications take less than half their prescribed doses, according to a 2006 report by the Cochrane Collaboration.

Part of the reason gift cards often go unused is that they expire. The Federal Reserve Board is trying to stiffen regulations on pre-paid products. This Fed Roundtable Discussion gives a nice history of “stored-value products” as well as some ideas that might improve the gift-card experience for the consumer.

In his famous (for economics) paper “The Deadweight Loss of Christmas,” Joel Waldfogel examines the inefficiency of non-cash gifts, finding that most gifts lose between 10 and 30 percent of their value in the exchange.

It’s no wonder, given the results of this paper by Davy Lerouge and Luk Warlop. They provide strong evidence that familiarity with the recipient can actually impede a giver’s ability to give something the recipient actually wants.

Another paper by Joel Waldfogel comes to a similar conclusion: consumers’ own purchases generate between 10 and 18 percent more value, per dollar spent, than items received as gifts.

Here is Best Buy’s Annual Report for 2006, where you will find (on page 65) the gift-card “breakage” income–the industry’s term for card value that was bought but never redeemed–that the company reported for 2006: $43 million ($16 million generated in 2006 alone).

This Wired article reports on the web business SwapAGift.com, where you can trade a gift certificate from Victoria’s Secret, for example, for one from WalMart.

And finally, here’s a fun Excel sheet that shows you the discount that various gift cards have recently sold for on eBay.


AE

I am quoting Dubner and Levitt from their Times Magazine article:

"In the small survey of Yale undergraduates on which Waldfogel based his paper, grandparents gave cash 42 percent of the time, and parents gave cash 10 percent of the time. But not once did a student receive cash from his or her significant other. Plainly, there are a few relationships for which a cash gift is appropriate, but in most cases, the social taboo crushes the economist's dream of such a beautifully efficient exchange."

This, of course, is missing one of the essential points in receiving a gift: wondering what the giver had in mind choosing that particular gift.

When a friend of mine gives me a book (that could be bought for $20), I don't feel like I'd rather receive $20 cash. Instead, I get especially curious about this reading, wonder why she chose this gift over others.

The value of the exchange is hard to quantify but certainly is more than $20.

When she gives me that t-shirt as a birthday gift, I end wearing it, though I would probably not buy it if instead she had given me the money. But when I am thinking about what to wear for a sunny afternoon, if I find that tshirt in my wardrobe, the belief that this particular tshirt was chosen specifically by her, and for me, makes me happy.

Read more...

AE

I am quoting Dubner and Levitt from their Times Magazine article:

"In the small survey of Yale undergraduates on which Waldfogel based his paper, grandparents gave cash 42 percent of the time, and parents gave cash 10 percent of the time. But not once did a student receive cash from his or her significant other. Plainly, there are a few relationships for which a cash gift is appropriate, but in most cases, the social taboo crushes the economist's dream of such a beautifully efficient exchange."

This, of course, is missing one of the essential points in receiving a gift: wondering what the giver had in mind choosing that particular gift.

When a friend of mine gives me a book (that could be bought for $20), I don't feel like I'd rather receive $20 cash. Instead, I get especially curious about this reading, wonder why she chose this gift over others.

The value of the exchange is hard to quantify but certainly is more than $20.

When she gives me that t-shirt as a birthday gift, I end wearing it, though I would probably not buy it if instead she had given me the money. But when I am thinking about what to wear for a sunny afternoon, if I find that tshirt in my wardrobe, the belief that this particular tshirt was chosen specifically by her, and for me, makes me happy.

Read more...

Maddison

It's appropriate time to make some plans for the future and it is time to be happy.
I have read this post and if I could I wish to suggest
you few interesting things or advice. Maybe you could write next
articles referring to this article. I desire to read
more things about it!

Here is my webpage: Yesfilmes.org

[WORDPRESS HASHCASH] The poster sent us '0 which is not a hashcash value.

1 Mac Cosmetics Pearlglide Intense Eye Liner 5 Colors To Choose From

Mac Cosmetic Shop Diorskin Star Studio Foundation Dune Hot Professional 15 Color Camouflage Concealer Cream Palette Face Corel Painter X3 Modbook Pro Mac OS X 29GHz I7 16GB RAM 1 Mac Foundation Nc15 Katherine Cosmetics K Sport Lip Protection Gloss SPF 20 Swing
1 Mac Cosmetics Pearlglide Intense Eye Liner 5 Colors To Choose From http://imsedu.org/uploads/1-Mac-Cosmetics-Pearlglide-Intense-Eye-Liner-5-Colors-To-Choose-From.html

[WORDPRESS HASHCASH] The poster sent us '0 which is not a hashcash value.

Read more...

Emelia

Your style is unique in comparison to other people I've read stuff from.

Thank you for posting when you have the opportunity,
Guess I will just book mark this site.

Here is my blog: Shelli

[WORDPRESS HASHCASH] The poster sent us '0 which is not a hashcash value.

MAC 316 Lip Brush

Read more...

Benefit Pretty Parfait Sugarglam Fairies Tin House Makeup Canisters

Dior Addict Ultra Gloss Reflect 617 Brown Corset Full Size 19 Oz In Poison Perfume By Christian Dior 34 Oz Eau De Toilette Spray For Authentic Mac Cosmetics Pigment Platinum Size 75g 0 2005 Ford Mustang V6 MAC Dual Exhaust Conversion Kit Mac Makeup Set Cheap Estee Lauder Cyber White Brilliant Perfection Full Spectrum
Benefit Pretty Parfait Sugarglam Fairies Tin House Makeup Canisters http://studio57hairandbeauty.co.uk/uploads/Benefit-Pretty-Parfait-Sugarglam-Fairies-Tin-House-Makeup-Canisters.html

[WORDPRESS HASHCASH] The poster sent us '0 which is not a hashcash value.

Read more...

index

Read more...

MAC 32 Lash

Lancome High Resolution Holiday Set Mac Cosmetics X Rihanna Riri Hearts Mac Smoked Cocoa Eyeshadow MAC Archies Girls Betty Lipglass Kiss Don T Tell Sold Out Lmt index Mac Makeup Lipsticks Philosophy The Present 2oz
MAC 32 Lash http://sgproviderapps.com/uploads/MAC-32-Lash.html

[WORDPRESS HASHCASH] The poster sent us '0 which is not a hashcash value.

Read more...

Balenciaga Classic Mini City Black

Isabel Marant Sneakers Youtube Balenciaga City Edge With Silver Hardware Maldive Tote Bag MAC NW13 Studio Fix Powder Plus Foundation Mac M路A路Cnificent Me! Patentpolish Lip Pencil Tan Beige Isabel Marant Boots Booties Black Dark Green Shoes Isabel Marant Basket Bag
Balenciaga Classic Mini City Black http://www.mariposaglobal.com/uploads/Balenciaga-Classic-Mini-City-Black.html

[WORDPRESS HASHCASH] The poster sent us '0 which is not a hashcash value.

Read more...