#22 - Economist: Gifts of cash or gift cards, which allow

[Administrator]

Please post your questions below!

[Boudreaux]

Would someone please help me with this question? I see that the first sentence is stating that recipients value the cash/gift cards higher, but in the study they valued the gifts lower. Am I reading this correctly and if so, what is the intent of these 2 sentences? The correct AC states they are willing to sell (value) the gifts at a higher cost.

I think I can loosly understand, but I need an expert to walk me through this one.

Thanks,
Nick

[James Finch]

Hi Nick,

The argument being made in the stimulus is that recipients value cash/gift cards more highly than actual gifts because they wouldn't have paid more than 2/3 the price paid for the gift. This would be strong evidence for the conclusion if the recipients view the value of the gifts as equal to the price. But we don't know that, so any evidence that undermines that assumption would serve to weaken the argument. (D) does this by saying that recipients overvalue sellinggifts by 50% compared with cash, showing that recipients don't just undervalue the price of buying gifts, they also overvalue the selling of those gifts, making the evidence used in the stimulus highly suspect and strongly undermining a conclusion that they value the gifts less than cash.

Hope this clears things up!

[curly1]

Hi! I understand why D is correct now, but could someone explain why C is incorrect? Thanks.

[Adam Tyson]

The question to ask yourself, curly1, is how answer C undermines the claim that gift cards and cash are more highly valued than the actual tangible stuff given to them by others. I might value a gift from my son more than a gift from my coworker, but I could still prefer cash or gift cards to either. Answer C does not create any doubt about that conclusion, but only establishes a hierarchy of sorts among the tangible gifts.

How about an example? My son gave me a football jersey for my birthday (Panthers, #59, Luke Kuechly). I think "wow, I would have paid $100 for that if I was going to buy one for myself!" Turns out it's actually worth $150.

My neighbor gives me a similar jersey (this time it's #1, Cam Newton), and I think "that's very generous - I would have paid $80 if I was buying it for myself." Actual retail price? $175.

What does this tell me about whether I value those gifts more than, say, a $150 gift card? Nothing! I could prefer the card, or I could prefer the jerseys. The argument isn't touched by this bit of info. But it's certainly hurt if I would refuse to sell either jersey for less than $200, more than the retail price of either! I'd probably sell the $150 gift card for $150, and I would definitely sell it for $160. Answer D is about measuring value not by what you would pay for a thing, but by how much you would demand before selling it. By that measure, the gift cards lose, and the argument is weakened. Perhaps the fact that it was a gift makes me value it more?

I hope that helps! If so, and if you wish to thank me with a gift, I already have a Kuechly jersey, but you can send me a Newton one, or Christian McCaffrey, Julius Peppers, or Greg Olsen. I'm flexible, easy to shop for, really.

[curly1]

The question to ask yourself, curly1, is how answer C undermines the claim that gift cards and cash are more highly valued than the actual tangible stuff given to them by others. I might value a gift from my son more than a gift from my coworker, but I could still prefer cash or gift cards to either. Answer C does not create any doubt about that conclusion, but only establishes a hierarchy of sorts among the tangible gifts.

How about an example? My son gave me a football jersey for my birthday (Panthers, #59, Luke Kuechly). I think "wow, I would have paid $100 for that if I was going to buy one for myself!" Turns out it's actually worth $150.

My neighbor gives me a similar jersey (this time it's #1, Cam Newton), and I think "that's very generous - I would have paid $80 if I was buying it for myself." Actual retail price? $175.

What does this tell me about whether I value those gifts more than, say, a $150 gift card? Nothing! I could prefer the card, or I could prefer the jerseys. The argument isn't touched by this bit of info. But it's certainly hurt if I would refuse to sell either jersey for less than $200, more than the retail price of either! I'd probably sell the $150 gift card for $150, and I would definitely sell it for $160. Answer D is about measuring value not by what you would pay for a thing, but by how much you would demand before selling it. By that measure, the gift cards lose, and the argument is weakened. Perhaps the fact that it was a gift makes me value it more?

I hope that helps! If so, and if you wish to thank me with a gift, I already have a Kuechly jersey, but you can send me a Newton one, or Christian McCaffrey, Julius Peppers, or Greg Olsen. I'm flexible, easy to shop for, really.

Hahah, I'll keep that in mind! And thank you for the insightful reply. It makes total sense now.

[snowy]

Building off the previous discussion, can C also be ruled out because the stimulus specifically talks about the average (so then the variation between close friends vs. others would’ve been accounted for within that average)?

[KelseyWoods]

Hi Snowy!

Potentially, but in truth we don't know enough about this study to determine if it accounted for who exactly the gifts were coming from. It's possible the study asked people to name specific gifts that they had recently received and so that might have accounted gifts from close friends and relatives as well as others. But the study could have just offered them potential gifts given by unnamed others. For example, maybe the questions went something like "Suppose someone gives you a Cam Newton jersey. How much would you have been willing to pay to purchase this jersey yourself?" If all of the questions were along those lines, the study really wouldn't be taking into account how we might assign different values to gifts from those closer to us rather than just from random others.

So the more solid reason to eliminate this answer choice, as Adam previously described, is that it still doesn't have anything to do with whether people might prefer cash or gift cards over tangible gifts from even close others.

Hope this helps!

Best,
Kelsey

[vbkehs]

Can you please explain why D is correct in similar terms as you described why C is wrong below?
Also, can you please how the "unless" translates in answer choice D? Thank you!

The question to ask yourself, curly1, is how answer C undermines the claim that gift cards and cash are more highly valued than the actual tangible stuff given to them by others. I might value a gift from my son more than a gift from my coworker, but I could still prefer cash or gift cards to either. Answer C does not create any doubt about that conclusion, but only establishes a hierarchy of sorts among the tangible gifts.

How about an example? My son gave me a football jersey for my birthday (Panthers, #59, Luke Kuechly). I think "wow, I would have paid $100 for that if I was going to buy one for myself!" Turns out it's actually worth $150.

My neighbor gives me a similar jersey (this time it's #1, Cam Newton), and I think "that's very generous - I would have paid $80 if I was buying it for myself." Actual retail price? $175.

What does this tell me about whether I value those gifts more than, say, a $150 gift card? Nothing! I could prefer the card, or I could prefer the jerseys. The argument isn't touched by this bit of info. But it's certainly hurt if I would refuse to sell either jersey for less than $200, more than the retail price of either! I'd probably sell the $150 gift card for $150, and I would definitely sell it for $160. Answer D is about measuring value not by what you would pay for a thing, but by how much you would demand before selling it. By that measure, the gift cards lose, and the argument is weakened. Perhaps the fact that it was a gift makes me value it more?

I hope that helps! If so, and if you wish to thank me with a gift, I already have a Kuechly jersey, but you can send me a Newton one, or Christian McCaffrey, Julius Peppers, or Greg Olsen. I'm flexible, easy to shop for, really.

[Adam Tyson]

Happy to, vbkehs! The stimulus is about comparing the value of two things - a tangible gift vs a gift card or cash - by comparing what someone would be willing to pay for it. So to follow up on my earlier example, if my wife gives me a Panthers sweater that retails for $100, I might look at it and say "I would have paid $67 for that - if it cost any more than that I would not have bought it for myself." Meanwhile, my mother-in-law gives me that $100 gift card, for which I would have happily paid $100 (and even more happily paid $90 for it). According to this study, this means that I value gift cards and cash more than I value that sweater.

Answer D challenges that idea by making a different comparison: how much would I be willing to accept for the gift if I was going to sell it? If it turns out that I would be unwilling to part with that $100 sweater unless someone gave me at least $150 for it, but I would of course part with the gift card for $100, and be thrilled to sell it for $110, then it looks like I actually value the tangible gift more than I value the gift card. It's contrary data, using a different standard for determining how someone measures value. I love my sweater, and even though I would have only paid $67 for it, you better keep your grubby hands off it until you fork over a cool $150, pal! I may be a cheapskate who wouldn't fork out his own money to buy that gift, but you better come with plenty of cash if you want to get it from me now that I have it!

As to the "unless" in answer D, it does what it always does in these cases - it indicates a necessary condition and triggers the Unless Equationtm. Answer D is a conditional claim that can be written this way:

Willing to Sell Gift Offered Min 1.5x price

(If you are willing to sell a gift, you must have been offered at least 1.5 times the actual price of the gift. The contrapositive would be if you are not offered at least 1.5 times the original price, you are not willing to sell it.