Economist: Gifts of cash or gift cards, which allow the recipient to choose the actual gift, are more highly valued b...

shunhe on August 10, 2020

Hi @ankita96,

Thanks for the question! So let’s break down this stimulus first. We’re told that people value cash/gift cards more than actual gifts themselves. Why? Because there was this study that said that when people were asked how much they were willing to pay for a gift that someone got them, they said a number that was 2/3 the price of the actual gift.

So take the following example: I give you a gift that’s worth $100. A nice office chair or something. And then someone asks you how much you’d pay for it, and you say $67. Well, seems like I should’ve just given you $100 in cash/gift cards then.

Now we’re asked for something that’ll weaken this argument. So we want something that’ll make it seem less likely that people value cash/gift cards more than the actual gifts.

Now look at (D), which tells us that people are unwilling to sell gifts chosen for them by others unless offered about one and a half times the gift’s actual price. So someone comes along and offers to buy the chair I gifted you. And you won’t sell it for less than $150. Well, then it does seem like you value it more than $100 in gift cards/cash! And so (D) weakens the argument.

Hope this helps! Feel free to ask any other questions that you might have.