Sunday, April 22, 2012

Economics of housewarming gifts

Housewarming gifts can be hard to choose. Having recently held one, I can assure you that the probability of you receiving a plant or alcohol is quite high.
Now being the usual twenty something male who knows nothing about taking care of plants, I can assure you that I had no preference for any kind of plants or otherwise, but I appreciated the gesture and hope that it stays alive for at least a month. All I know as of now is that I have to Google - "how to take care of a plant" and eventually, "how to remind yourself to take care of your plants".

But regardless, let me stick my head out and say that you're better off bringing alcohol as it has a good shelf life, and worse case, if the person being presented alcohol as a gift doesn't drink it immediately, they'll drink it eventually, or pass it on to someone else as a gift.

Now comes the question of what kind of alcohol?
Alcohol preferences can be tricky, so I definitely recommend picking beer / wine / whiskey according to your budget and better if you know the end consumers preferences.

Now if you are not being thrifty, should you buy a cheap or expensive wine becomes the next question?
If you've read any relevant research on blind taste testing on wine, the odds are 50: 50; most consumers can separate cheap wine(<$10) from expensive wine only half of the time. And the nerd in me tells me that you might as well flip a coin in such cases (see: Guardian); so you're better off buying cheap booze rather than expensive booze.

This raises another question as to whether you should buy the preferred alcohol of the individual you're visiting, or should you buy something else. Even if you did know the end consumers preferences, you would be better off buying alcohol where the end consumer can't tell the difference because that would be more economically efficient.

Most economists wouldn't argue about this at all since they believe that gifts are inefficient and the best utility will be derived from cash itself which has the highest time value of money, but not everyone is an economist, and you can surely imagine what would happen if you put a $10 bill on the table as a gift.

I'm not sure if the above argument made it easier for you to pick a housewarming present or made it harder, but its a dilemma worth considering.

Choose well.