Deciding what gifts to buy this holiday? More is not always better

When giving presents this holiday season, remember one thing. Less is more, according to an article forthcoming in the Journal of Consumer Research.

The new study by Kimberlee Weaver of Virginia Tech University and Stephen Garcia and Norbert Schwarz of the University of Michigan reveals that adding a less expensive gift to go along with a pricier present reduces the impact of the nicer gift. In other words, loved ones will appreciate an expensive present more if it's the only one they get.

"Suppose you're trying to impress a loved one with a generous gift. One option is to buy them a luxury cashmere sweater. A second option is to buy them the same luxury cashmere sweater and to add a $10 gift card to their favorite coffee house," said Weaver, assistant professor of marketing at Virginia Tech. "If their budget allows, most gift givers prefer the second option—after all, the package includes a very generous 'big' gift plus a mildly generous 'little' gift.

"Ironically, however, the loved one who receives the gift is likely to perceive the luxury cashmere sweater alone as more generous than the combination of the same luxury sweater plus a gift card. Unfortunately, the presenter of the gift does not anticipate this difference in perspectives and has just cheapened the gift package by spending an extra $10 on it." Weaver, Garcia and Schwarz say this "presenter's paradox" arises because gift givers and recipients have different perspectives. The gift recipient looks at the overall package as a whole. If the package consists of a generous luxury sweater, it makes for a very generous "big" gift. Adding a not-so-generous "little" gift to the sweater makes, on average, a less "big" and generous total package.

The researchers conducted a series of studies to illustrate the presenter's paradox across many product domains, from bundles of music and hotel advertisements to scholarships and the design of penalty structures. They found that people who evaluate a "bundle" (such as a package of multiple gifts) follow an averaging strategy, which leads to less favorable judgments when mildly favorable pieces (the gift card) are added to highly favorable pieces (the sweater). The gift giver, however, fails to anticipate this averaging effect.

When focusing on what to include in the gift package, the giver follows a "more-is-better" logic, they say. The same is true in many other situations. People who ...