Economics of Social Proximity – Measuring the Deadweight Loss of Tet Gifts

The question of whether gifts are undervalued or overvalued has long been the subject of investigation among psychologists and economists. At the root of this dilemma is the influence of perception and culture which sometimes affects people’s sentimentality regarding gift giving or receiving. In a previous study by Joel Waldfogel, the case was made that gift giving can result in deadweight loss, especially when the giver and the receiver have not collaborated on determining the gift choices. The deadweight loss (DWL) resulting from undervaluation can reduce the economic efficiency of the exchange. Although this phenomenon is widely reported in the United States, the scenario is different in Vietnam. This study has revealed that gifts received or given during Tet festivities are generally overvalued, and cultural orientation is not necessarily the reason.