Divergent Effects of Budgeting for Gifts versus Personal Purchases

Abstract

Consumers often set budgets with the goal to minimize their spending. Contrary to this traditional interpretation, our research suggests that budgets can take on a different psychological meaning depending on whether the budget is for a personal- or gift-purchase. Across 11 studies, we find that consumers aim to spend below their budgets for personal-purchases (budget-minimizing), but aim to spend the entirety of their budgets for gift-purchases (budget-maximizing). We differentiate budget-maximizing from spending-maximizing, showing that gift-purchasers are more likely to prefer “at-budget” than “above-budget” purchases. We also show that gift-purchasers have weaker savings goals than personal-purchasers—a difference that mediates the effect on their budget-minimizing and -maximizing tendencies. We explore multiple reasons that could explain why savings goals are less prevalent among gift-purchasers and find an upstream role for price consciousness, guilt, and perceived specialness. Finally, we find that consumers’ preference for spending the entirety of their budgets on gifts was moderated by two separate factors: consumers’ budget-slack and -salience. Our research adds to the literatures on mental budgeting, gift-giving and self-other decisions.