Evaluate emotional impact of your gift

When it comes to gifting your key clients, or for that matter, employees, it does not take a showy or huge gift, or one paid for directly by the giver, to make it really work. A recent research released by Klaus Schmidt, the Munich University in conjunction with Ulrike Malmendier of Berkeley indicates subjects respond to even smaller and peculiar gifts favorably, though their earnings might be large.

The effect, in fact, appears to be much stronger when it happens to come probably at expense of a third party so not paid for by the particular giver personally, but by the company shareholders, to say, making that present. ‘You Owe Me’ by authors Ulrike M. Malmendier and Klaus M. Schmidt make the following points:

In many cultures and industries gifts are given in order to influence the recipient, often at the expense of a third party. Examples include business gifts of firms and lobbyists. In a series of experiments, it was shown that, even without incentive or in-formational effects, small gifts strongly influence the recipient’s behavior in favor of the gift giver, in particular when a third party bears the cost. Subjects are well aware that the gift is given to influence their behavior but reciprocate nevertheless, as mentioned above.

Withholding the gift triggers a strong negative response. These findings are inconsistent with the most prominent models of social preferences. We propose an ex-tension of existing theories to capture the observed behavior by endogenizing the “reference group” to whom social preferences are applied.

The study also showed that disclosure and size limits are not effective in reducing the effect of gifts, consistent with our model. Financial incentives ameliorate the effect of the gift but backfire when available but not provided.

If you are perhaps wondering what the cutoff is, well, the answer lies in your gut. In other words, if it somehow makes you feel a touch weird to gift a particular person, don’t do so temporarily. Mutual comfort factor is vital while giving and receiving presents or else the whole purpose will be lost and the exercise will become futile.

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