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Secret Santa

20th Dec 2013

There is some debate among economists about Christmas presents. They might be inefficient: if I don’t know what you want without asking you, perhaps I should just give you cash? Alternatively, gifts might be even more efficient than just giving money: spending time and effort selecting a gift can show how much time and effort you’ve put in, and therefore how much you care about someone (even if you don’t get it quite right).

But what about another holiday tradition – Secret Santa?

In case you don’t know, in a Secret Santa, members of a group are randomly and anonymously assigned another member of the group to buy a present for, often with a limit to how much can be spent. At the appropriate moment, everyone opens their gift, not knowing who bought it. Classical economics might suggest that this would be even less efficient than normal gift giving: anonymity eliminates your ability to show how much you care; identifying an appropriate gift is harder (as you can’t ask leading questions); and there’s less incentive to do so, because you won’t get the praise for the perfect gift. The restricted budget is also inefficient, as no matter how much you care, it is difficult to demonstrate it by spending more. Why, then, does this strange tradition persist?

One answer may concern the use of ‘anonymous rituals’, which allow members of a group to show who is and who isn’t committed to the group. In our Secret Santa example, only people who truly care about the group as a whole will buy nice presents (because there are no personal ramifications to not doing so). Secret Santa therefore allows a group to tell how many people within it are ‘free-riders’ – those who benefit from gift giving without putting in any effort themselves.

This is the main finding of a paper by David Hugh-Jones and David Reinstein (2012), who show that this kind of ‘anonymous ritual’ could boost social cooperation. It does this by helping groups to identify safe environments (those without any ‘free riders’) where they can be unafraid of getting cheated in future.

Anonymous gestures of this kind are also seen as more ‘honest’ because they don’t seem to be for personal gain. For example, people donate 4% more through JustGiving following a large anonymous donation than they do after a large public one (Peacey and Sanders 2013).

Hugh-Jones, David, and David Reinstein. “Anonymous rituals.” Journal of Economic Behavior & Organization 81, no. 2 (2012): 478-489. –

Peacey, Mike W., and Michael Sanders. Masked Heroes: endogenous anonymity in charitable giving. CMPO Working Paper No. 13/303, 2013.