What is Creating “Valentine’s Inflation”?

Three roses. Everyone else is giving roses by the dozen and I end up with a man whose decides partway through our (long) relationship that he giving three roses on Valentine’s Day is going to be his “thing”. Its quirky and fun he tells me but I know darn well that he has gone to the florist and asked “How much for a dozen roses?” … “How much for six roses?”…. “Um, okay then give me three.”

I didn’t care at the time and, in hindsight, really the lack of effort he put into that Valentine’s Day (and every Valentine’s Day after that) actually might have made good economic sense. 

Really would have been rational for him to shell out for an expensive Valentine’s Day gift for his pregnant wife on their first Valentine’s Day together as a married couple even if he was earning a healthy six-figure salary? (Okay, in hindsight maybe I cared a little) 

The reason I ask this is because Valentine’s Day gift giving really is for relationships where the long-run outcome is still uncertain and because of that, it is a big and growing business. 

The National Retail Federation has forecast that in the U.S. Valentine’s Day spending this year will increase by 8.5% over last year topping $17.6 billion dollars – $126 per person on average which is the highest in the ten years the federation has been collecting this data.

Relationships are rife with a problem that economists call asymmetric information; when two people engaging in a transaction don’t have access to the same quality of information transactions often do not take place because the person lacking information is unwilling to assume the risk that they are being deceived.

At the beginning of a relationship you may know your own heart, if you are lucky, but you never really know what it is the heart of the person you are dating. If you doubt that a man or woman shares your commitment to the relationship then you might start looking elsewhere for a new partner who does rather than staying in this one and risk being hurt later on. 

The solution to any asymmetric information problem is for the person who has high quality information to send a signal that credibly communicates to the other person that they can be trusted to provide accurate information.

In a new relationship, the person you are dating might tell you that they are committed to being with you for the long run but talk, as they say, is cheap.  

A signal’s credibility is directly related to the cost the signal imposes on the sender. If the cost is low the signal conveys very little information. But as the cost increases so does the assurance to the receiver that they are not being deceived 

The best way for your partner to convince you that he/she is serious about your relationship is to send a signal that imposes real cost on him/her. Giving a costly gift, then, might send a strong enough signal to convince you to stay in the relationship a little longer rather than hedge your bets and look elsewhere.

Thinking about relationships as an asymmetric problem solved by costly signaling allows us to answer three questions:

These signals can be sent at anytime so what is so special about Valentine’s Day?

Valentine’s Day is really just a massive coordinated signaling opportunity that taps into our need to think about “value” in relative, rather than absolute, terms. Your loved one may appreciate your thoughtful gift but having the opportunity to compare your gift to the gifts received by his/her friends helps determine the strength of the signal that the gift you are giving conveys in terms of your commitment. 

In this regard it isn’t that surprising that Valentine’s Day spending is increasing year over year – competitive signaling is driving up the amount that individuals need to spent in order to convey the appropriate signal to the person they love. 

Why do men spend so much more on Valentine’s Day gifts than do women?

According to the forecast men this year will spend almost double what women will spend on Valentine’s gifts: $168 compared to $86. 

That difference in spending makes sense if women, on average, are the ones who need to be reassured that their lover really is committed to their relationship. If men are more likely to trust that women who say they want to stay in a relationship are being honest, then women don’t need to invest as much in costly signals as do men.  

A second alternative is that women find other ways to signal their level of commitment to men outside of buying gifts. For an example of what that might look like you might consider watching this little video here. 

Once the rings are on what is the point of expensive gift giving on Valentine’s Day? 

Because even men and women who are married need to be assured that the person who steals their covers at night not only still loves them but is willing to continue to invest in the relationship over the long run.  

In that regard, the ease at which people can now find new partners (via the internet, for example) and at which marriages can be dissolved might be creating some Valentine’s gift giving inflation of its own as couples need to work harder to maintain the quality of their relationships. 

At the end of the day there is nothing wrong with giving three roses on Valentine’s Day if quirky and sweet are qualities your partner values. Giving your new girlfriend a frozen Flintstone-sized ostrich steak, now that is an entirely different story … one that I will have to save for another day.