Children and the economics of Christmas gift-giving

Abstract

In spite of its importance to the retail sector, there has been relatively little research on the economics of Christmas Season gift-giving. The one exception is Waldfogel (1993), The Deadweight loss of Christmas, American Economic Review, 83, 1328–1336, who found a substantial amount of deadweight loss associated with Christmas gift-giving. Here it is shown that the Waldfogel study is incomplete and alternative models of consumer choice theory which better explain Christmas gift-giving are identified. Although the standard neoclassical and altruistic models predict no relationship between the population of children and per capita Christmas spending, a model is developed that includes non-pecuniary externalities and predicts that children have a positive impact on Christmas gift-giving. This prediction is supported by empirical evidence.