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December 12, 2006

More on the Deadweight Loss of Christmas

Marginal Revolutions has had several interesting contributions to the phenomenon lately. First, Tyler Cowen notes a new study that finds, "that the better you know someone, the harder it can be to predict their taste." So don't feel bad about returning that crappy gift; the giver must be a close friend. Second, Alex Tabarrok looks at some alternatives of what would happen to the economy if we didn't spend all this money buying crap for each other.

The third finding is a brief item about a $20 gift certificate to Old Navy that sold on eBay for $22 (+ $2.99 shipping). This is unusual, as gift cards generally sell for 80-90% of their face value on most eBay auctions I've seen. I'll note here that I think an enterprising economist could make some great discoveries by examining the sales of gift certificates on eBay. But why one would sell for 110% of its face value is baffling (that buyers are seemingly indifferent to shipping costs has already been recognized).

One of the enterprising commenters emailed the winning bidder and, as some had suspected, the transaction cost of buying the GC at a brick-and-mortar outlet were higher than the auction:

Well everybody, I received and answer from the winning bidder himself. "I am far enough from an Old Navy that the gas there would exceed the $2."

And yet, and yet . . .

[Old Navy's website] claims that there's no shipping or sales tax on the gift cards. If this is true, he could have delivered $25 of value to his giftee for a penny more than he spent for which he will deliver $20.

D'oh! So much for the Internet's contribution to information symmetry.

Posted by Zach Wendling at December 12, 2006 06:50 AM

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Posted by: Mark Byron at December 12, 2006 07:22 AM | permalink

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