November 20, 2017
How to Predict the Perfect Gift
By Ann Lyon Ritchie
Media Contact: Shilo Rea 412-268-6094
It's an age-old question. Do shoppers pick out a gift they think someone might like, or do they purchase exactly what the recipient has asked for?
At Carnegie Mellon University, behavioral economists tackle complicated problems using a distinct fusion of economics and psychology. They work to understand why we eat unhealthy food, pay women less than men and even how to give the perfect gift. Here are four science-backed tips to help during the holiday shopping season.
Projection bias is a phenomenon that describes how people believe others hold the same beliefs and values as they do—and will in the future. When gift giving, shoppers often try to predict what the recipient would like, thinking recipients will share their same tastes.
“If you like dark chocolate and loath milk chocolate, it’s very tempting to give dark chocolate, even if the gift recipient’s tastes are opposite to yours; it’s very difficult to imagine that another person would enjoy receiving a gift that you would hate,” said George Loewenstein, the Herbert A. Simon University Professor of Economics and Psychology in the Dietrich College of Humanities and Social Sciences and co-founder of the field of behavioral economics.
A gift that is exactly what someone asked for might seem lacking in creativity, but it has a better chance of success. Research has shown that people are not very good at predicting what their friends and family members would like.
Be Aware of Your Shopping Environment
Kareem Haggag, assistant professor of economics in the Social and Decision Sciences Department, studies attribution bias, and his work shows the gift-givers past experiences will influence their opinion of a product.
"Our work on attribution bias is about evaluations we make of past experiences with an item and, specifically, our failure to fully account for our temporary states‑thirst, fatigue, etc.—that could have affected enjoyment. For example, if you happened to sample a restaurant when you were extremely hungry, you might later overrate it because you failed to account for just how important being extremely hungry played in that experience," Haggag said.
He advised gift-givers to be careful and think about past experiences with an item they are considering purchasing. An item purchased on vacation when the buyer was happy and carefree may be the so-called lousy t-shirt to the recipient. Attribution bias may cause the gift-giver to believe their gift more valuable or attractive than it actually is.
Consider Whether Past Holidays Are An Influence
If you were not thanked by a recipient in the past, you may be less likely to put time and effort into gift-giving for that person in the future, according to Shereen J. Chaudhry (DC'13, '16). Chaudhry, now a post-doctoral research fellow at Wharton School of Business, wrote a dissertation with Loewenstein for the Behavioral Decision Research Program titled, "Thanking, Apologizing, Bragging and Blaming: The Currency of Communication."
Chaudhry said that words of thanks are more than "cheap talk" and help keep relationships healthy.
"With gift-giving, the desire is often to deepen the connection with and to impress the recipient, to show the recipient that the giver is a valuable partner or friend,” Chaudhry said.
She continued, “Though it may be difficult for some people to admit, this means that, in many, if not most, cases of gift-giving, our generous motives are mixed with self-interested motives. Rather than taking this as depressing news, realize that this highlights the importance thanking can have in maintaining and deepening relationships.”
Focus on the Long-Term
Researchers led by the Tepper School of Business’ Jeff Galak found that that gift givers tend to focus on the moment of exchange when selecting a gift, whereas gift recipients are more focused on the long-term utility or practical attributes of the gift.
“We studied many existing frameworks from research in this area, trying to find a common ground between them. What we found was that the giver wants to ‘wow’ the recipient and give a gift that can be enjoyed immediately, in the moment, while the recipient is more interested in a gift that provides value over time,” said Galak, associate professor of marketing. “We are seeing a mismatch between the thought processes and motivations of gift givers and recipients. Put another way, there may be times when the vacuum cleaner, a gift that is unlikely to wow most recipients when they open it on Christmas day, really ought to be at the top of the shopping list as it will be well used and liked for a long time.”
Choosing the perfect gift may be less about how well you know someone, and more about allowing time for careful consideration and setting aside emotions. (But keep the receipt, just in case.)