The Economics of Remainders, or, Cash still the best gift

Nothing says "I thought about you" like a gift of cold hard cash. Seriously. It means you thought enough to say "I don't know your preferences as well as you do, and what I'd really like to give you is a little slice of selfish pleasure, so go spend this on anything your heart desires."

Don't buy it? Well, it seems like those gift cards are a big way to say "I thought of something you kinda like, but only in large, general terms, so here's a way to spend money within that broad category." But don't feel like you're doing people that much of a favor. Turns out, those things are big boons to the companies that sell them:

Retailers profit from unused gift cards - Yahoo! News

Companies are profiting from your forgetfulness, and the hope that you don't value the gift-giver's dollar the way you value your own. Why else would you let that remaining $5.43 just go to waste sitting on a gift card that's collecting crumbs under the seat of your car? Sure, Aunt Helga wanted you to spend ALL fifty bucks, but really, what can you get for a few bucks, and besides, the store is all the way on the other side of town...

Well, there is an option at SwapAGift, but then you have to be willing to consider your valuation of $100 here versus $100 there. The swap brings down the deadweight loss of Christmas, but doesn't eliminate it. I see it more as a new weapon in the quiver of people who will eat at specific restaurants because they get double mileage points on Thursday lunches when using a credit card.

The cynic in me likes to think that the gift-card sellers have simply learned a valuable lesson from big-city governments, who have long been relying on the remainders from unused farecards for riding on the local subway system as a way to keep the system solvent. Of course, that's not always enough.

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This page contains a single entry by published on December 18, 2006 3:16 PM.

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