The Microeconomics of Christmas

Yves here. Help me. This sort of thing gives economists a bad name. I am sure readers will manage to have even more fun with this, erm, Christmas piece, but consider one looming consideration they miss: shopping is work. Some people don’t like shopping. Other people who are indifferent don’t have the time. So having someone else shop for you is a part of why gift giving is a good thing. Did these economists miss that there are professional shoppers in the form of “personal shoppers” and decorators?

On top of that, even people who do shop often fall into habit, and a friend or family member can find things they like that they would not have unearthed on their own.

By Silvia Merler, an Affiliate Fellow at Bruegel who previously worked as Economic Analyst in DG Economic and Financial Affairs of the European Commission. Originally published at Bruegel

n 1993, Joel Waldfogel made the well-known seminal contribution in the American Economic Review, outlining the problem of the “deadweight loss of Christmas”. Waldfogel argued in favour of shifting the festive focus from the effects of Christmas spending on the economy onto the microeconomic implications of gift-giving. At the micro level, gift-giving is prone to a potential deadweight loss problem, because the best the gift-giver can do is to replicate the choice that the recipient would have made. While it is possible that the recipient may value the gift more than its price, it is more likely that the recipient will be left worse off compared to a situation in

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