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Jason

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A Nash Equilibrium to All, and to All a Good Night [Dec. 25th, 2006|01:07 pm]
Jason
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I feel like overanalyzing and overrationalizing christmas now. It's the kind of thing I do from time to time.

Among other things I got some gift certificates to Borders for christmas. I'm not about to complain, but gift certificates always seem kind of strange to me on a game-theoretic level, because they're worse than cash, and everyone exchanging cash would be just a wash.

Like, apart from the whole aspect of giving gifts to show that you actually care about people, which obviously is an important thing, you hope that in the ideal case the utility the recipient gets from the gift is bigger than what it cost you; because then everyone gets gifts to everybody, and everybody net wins, as if everyone was playing something roughly isomorphic to the Prisoner's Dilemma and all cooperated. This makes sense, because for everything I actually decide to purchase for myself, the utility I expect to get from it exceeds what it costs, because otherwise it wouldn't be worth buying.

So: an exchange of (good) gifts nets everyone positive utility, an exchange of cash nets zero, and an exchange of all gift certificates nets everyone slightly negative, because you've all just turned cash into cash-that-can't-be-used-everywhere.

But the fact that it's merely slightly negative is obviously why people buy them; if I don't think I'll be able to buy someone a gift they like, that means I have some probability distribution I'm estimating in my head (of the utility the giftee is accruing from my gift) that has an upsettingly large standard deviation and negative mean. So I can at least make the spread of the deviation smaller by getting a gift certificate.

The thing that's odd is that this is considered better than not exchanging anything at all. I guess it's that good feeling people get from just participating in the ritual.

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Edited to add: nightspore led me to this Surowiecki article that mostly says what I wanted to, but more eloquently. The unfortunate conclusion is that we're all supposed to just spend more time coming up with thoughtful gifts. Dang, that sounds like effort.
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Comments:
[User Picture]From: max_ambiguity
2006-12-25 06:25 pm (UTC)
I give gifts because I want people to be in my debt. It works better with holiday cards though: I sent out 34 this year and only got 9 in return. That's twenty-five people who owe me now - maybe they don't owe me anything more than a phone call, but still.
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[User Picture]From: gwillen
2006-12-25 06:33 pm (UTC)
That's harsh. :-P
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[User Picture]From: max_ambiguity
2006-12-25 06:40 pm (UTC)
I'm a little bitter about the Christmas card ratio.
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[User Picture]From: gwillen
2006-12-25 06:34 pm (UTC)
I think you're not measuring the utility right. When I give a gift, I'm not just giving monetary value, I'm also giving my attention. If I give cash, the monetary value is maximized, but the human (attentional) value is minimized. Gift certificates are a step above that because they are a way of saying "even though I didn't know what to get you, I thought of you because at least I knew what store to get it from."
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[User Picture]From: jcreed
2006-12-25 08:05 pm (UTC)
That's the kind of thing that I sort of meant to include in "apart from the whole aspect of giving gifts to show that you actually care about people, which obviously is an important thing".

If you discount the stuff that distinguishes gift-giving from self-buying, (which, again, I totally understand is important to the vast majority of people!) then what's left is the purely game-theoretic aspect of it. I guess how I feel about it is after all these years of my family buying dubiously appropriate gifts for me and vice-versa, there is not much left that I feel about it but the game-theoretic aspect. It actually does feel like people are going out and spending $n on themselves, except I don't even have $n worth of stuff I want to buy for myself, and the rest of my family seems upset at the fact that I don't make them a list of stuff to buy for me.
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From: aleffert
2006-12-25 07:42 pm (UTC)
I thought the point of stuff like that was to allow us to buy ourselves things without feeling guilty. That is, I want to buy this thing but it is kind of a waste of money. If I buy a gift for someone else, well it's a waste of money, but it's for someone else. Reciprocity kicks in and you get stuff without feeling guilty.
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[User Picture]From: nightspore
2006-12-25 08:18 pm (UTC)
Or a way of extending what aleffert sez, is that this is a kind of Schelling-esque strategy of commitment, forcing you to hyperbolic discounting as against your more practiced, rational, realistic sense of maximizing utility over the long run. You have no choice but to buy what Borders sells, rather than buying, say, a sweater which you might rationally need more but hyperbolically desire less.

Plus, as Henry James says (in The Golden Bowl), and by way of summarizing all the comments, "One should be willing to pay more for a gift than for oneself." As long as it is a gift, which should be more expensive than it's worth. Because if it weren't more expensive than it's worth, one could rationally buy it for oneself.

This week's New Yorker has a piece by James Surwecki, on the deadweight loss of gift cards and other Christmas gifts which is pretty interesting, and to which I'd make the same response.
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[User Picture]From: damion
2006-12-25 08:22 pm (UTC)
This is roughly where I fall. If you give cash, that cash goes immediately into your fungible cash drawer and becomes part of your budget, where you'd feel bad spending the cash on books instead of using it on rent or other necessary things. The gift card makes it so that you can go on a little shopping spree with no danger to your bottom line.
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[User Picture]From: jcreed
2006-12-25 09:07 pm (UTC)
But your bottom line is already endangered by the expectation that you buy gifts for everyone else! I do like irrationally splurging from time to time, but not on someone else's schedule that says I have to do it at least once a year.
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[User Picture]From: damion
2006-12-25 10:05 pm (UTC)
That is a criticism of giftgiving, rather than of gift cards. The analysis is not an economic one, but rather a warm, squishy, human one. The fundamental reason to give gifts is because people like giving people things. If the aim were simply to give gifts so that you could get things you wanted in return, it would usually be best just to get the things for yourself.
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[User Picture]From: easwaran
2006-12-28 08:29 am (UTC)
However, it's also redistributionist. In most cases, someone with more money floating around is likely to buy more expensive gifts for people, and someone with less is likely to get something cheap and thoughtful. Or something like that. So it doesn't quite threaten the bottom line. And it's not equivalent to just spending the money on yourself, because it's a different amount of money.

Not to mention the nice times that someone gets you something neat that you'd never have thought of for yourself.
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From: simrob
2006-12-26 04:33 am (UTC)
Yes! My specific thought on this came from a comment someone (maybe my mother) made once - if I get cash, I'll spend it on groceries. If I get a gift certificate, I'll buy something. This is more true of people that, say, buy groceries, of course, but what you're saying with a gift certificate is, "I understand that if I get you cash, you'll by $25 worth of groceries with it, and with groceries you'll get about $25-equivalent utility out of it. However, if I force you to buy something from Best Buy, it's your own good because I believe I know you well enough that you will get more than the equivalent grocery-utility out of $25 of small electronics/music (in the Best Buy instance)."

More abstractly, a gift card to X says that 0) it's okay, we're all human, you'll put cash in the fungible cash drawer 1) you think recipient is going to get c_1 utility from cash in fungible cash drawer 2) you think recipient is going to get c_2 utility from a purchase from X, and 3) c_1 < c_2 - \alpha, where \alpha is the slight-annoyance factor of a gift card. This is not true for someone with very little cash, this is not true for someone for whom who will spend gift-money studiously on gifts for themselves, so that assumption 0 does not hold. I think for most people it holds.
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From: lincoln3
2006-12-25 08:19 pm (UTC)
Company X: Please enjoy giving us millions in interest free loans!
Gift card givers: I ENJOY.
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[User Picture]From: jcreed
2006-12-25 08:35 pm (UTC)
Yes, this is the most cogent analysis I have heard of gift cards ever.
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From: simrob
2006-12-26 04:34 am (UTC)
Well, of the motivation for offering them certainly.
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[User Picture]From: meshach
2006-12-25 08:36 pm (UTC)
I only buy gifts when I find the right thing. The result? I got my brother a present for the first time in three years, but he hasn't stopped playing with it all day. I think it works out all right. :)
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[User Picture]From: meshach
2007-01-04 02:05 am (UTC)
A silver, masculine looking puzzle ring from Istambul. 4 strand.
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From: simrob
2006-12-26 04:35 am (UTC)
I respect and admire this position!
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[User Picture]From: ofsusan
2006-12-25 10:23 pm (UTC)
I spent a portion of the ride out to CT reading that article to Adam. My only complaint was the estimate of deadweight loss at around 10-18% -- I'd be shocked if it's truly less than 50%.
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From: dr4b
2006-12-26 02:21 am (UTC)
I actually kind of like gift cards, but independently of the whole gift-obligation thing. For me, they give me an excuse to go places sometimes ("Hey, I should go to Portland and spend my Powell's gift card and go annoy rjmccall").

A few years ago though, my dad was really lazy after his heart attack and stopped making the effort to actually leave his apartment and all... so for his birthday and the subsequent holidays, I got him a bunch of gift cards to places within walking distance of his apartment, so he'd have to actually go out and redeem them, otherwise let his daughter's money go to waste. I think it was pretty helpful (and he'd call or email me like "hey, I walked down to Tower Classical today and spent your gift card...") Of course, all the gift cards you can use online now sort of kill that aspect of it, I guess. But I liked thinking that I was buying my dad some exercise and fresh air in addition to the gift card at the time.
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[User Picture]From: blistex
2006-12-26 03:28 am (UTC)
I might have a more elaborate response to this in the morning, but I just wanted to comment that I totally get this point of view on gift cards but it makes me sad, because in my case a gift card IS a thoughtful gift, since shopping is right up on my list of top three things to do. So for me a gift card is not really a cop-out but the Gift of Shopping, and usually to the kind of place where I will always spend way more money than anyone would ever get me (Barnes & Noble, yarn stores, et cetera) so the whole can't-spend-it-everywhere bit doesn't hinder anything.

When people give me straight up cash, somehow it always ends up going to bills and necessities, or I do something stupidly responsible like pay down my student loans.
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From: taoflaherty
2006-12-30 05:52 am (UTC)

Gift cards are so better than money!

Money goes to bills and paying off loans and investments and other stuff-I-should-spend-money-on.
But a Barnes&Noble gift card is a book! I love books! Getting me a book gift certificate indicates that you want me to have more books and enjoy reading (and will help me get over my concern about spending too much money on math books).
Or maybe you know that somebody needs frames to display their big pretty artwork, but that there's essentially no chance of them spending over fifty dollars for a frame. So you get them a frame gift certificate, so they can get a frame in a color they like and the size that they need.
Or you want to get somebody cute clothing from somewhere in particular, but you don't know their size.
Or you want to get somebody big heavy exercise equipment, but they're spending Christmas with you, which is thousands of miles from where they live.
Or you know that somebody needs new shoes and need to hit them over the head with that fact.
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