The economics of Black Friday

Robert H. Frank writes:

In recent years, large retail chains have been competing to be the first to open their doors on Black Friday. The race is driven by the theory that stores with the earliest start time capture the most buyers and make the most sales. For many years, stores opened at a reasonable hour. Then, some started opening at 5 a.m., prompting complaints from employees about having to go to sleep early on Thanksgiving and miss out on time with their families. But retailers ignored those complaints, because their earlier start time proved so successful in luring customers away from rival outlets.

This is portrayed as a zero-sum or negative-sum game, but I view the matter, at least in efficiency terms, more optimistically.  The alternative to waiting in line and fighting the crush is to go shopping some other day, hardly a terrible fate.  More analytically speaking, the average return in other endeavors limits how bad these rent-seeking games can get, otherwise just switch and stay home and read your blogs, as some of you perhaps are doing right now.

In fact it seems that early December has in general the cheapest prices of the year, not Black Friday.

Dare I suggest that some people like waiting in those lines with their thermos cups and stale bagels.  You could try to argue they are “forced to do so,” to get the bargains, but in a reasonably competitive world  each outlet will (roughly) try to maximize the consumer surplus from visiting the store, including the experience of waiting in line.

If your store does a crazy sale at 5 a.m., and mine does a crazy sale at 9 a.m., the somewhat saner people still can go to my store, if they prefer to, without losing any bargains.  Maybe the truly early opening hour signals bargains, and customers would assume that a 9 a.m. opening means no bargains, but of course there are plenty of other ways to signal low prices, including through advertisements and the overall reputation of the store’s Black Friday over the years.  I don’t see any line in front of Bon Chon Chicken, now at Fairfax Circle by the way on Old Lee Highway.

You might try a behavioral story that consumers are tricked by the prospect of low prices, yet shelves rapidly empty, but it’s hard to see that working year after year, or even in one year, if pissed off customers won’t buy anything else.  More likely, the mix of low price and queue is a form of price discrimination, which as we know is generally welfare improving.

Although my efficiency prognosis is more optimistic than Frank’s, my underlying view of human nature — or perhaps economic growth — may be worse.  Is that really what people want to be out there doing?  I saw the Best Buy line last night and those people looked pretty normal.  That’s scarier than postulating a bunch of negative-sum games.


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