Black Friday game theory

Cont'd from previous posts...

But like it was said earlier it is the prisoner's dilemma.  If target is open starting 10pm thanksgiving day with deals and no one else is, then that pool of money is going to disproportionately go to target.  So then JCP says "we'll be open too!" and on and on.  So now everyone is open and everyone is luring people in the only way they know how.

But this is also one of those instances where people grumble about traffic while sitting in traffic.  They ARE traffic.  Complaining about black friday as americans rings hollow when more americans go for the sales than vote. 

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Thx, M. Re: the pris. dilemma... I think the comparison is not quite valid here for a couple reasons. First, some PD's can be defeated through communication and agreements. Maybe through retail trade groups or whatnot, the major players can promise that they will not open before time X. If certain companies violate, then they could be kicked out of the group and flamed by the rest. Also, not all retailers decided to play this game. Notable exceptions are Nordstrom, Costco, Radio Shack, and I think Kohl's. They know that there are just as many potential costs as there are benefits to opening early (as we have already discussed).

“There’s a PR benefit to holding out, just as there’s a PR benefit to opening early,” said Roger Beahm, a marketing professor at Wake Forest University. “We know that there is a consumer backlash to this.”

http://www.huffingtonpost.com/2013/11/13/costco-thanksgiving_n_4262774.html

Second, the PD assumes a "one turn" game with finality, and the players are "all-in" for the decision at hand (open early or not, collaborate or defect). But in reality, holiday shopping is a sequential game with multiple "turns" where players can react to each other's past actions. Holiday shopping is a relatively long war; even if you "lose" B.F. turn 1, you can win later turns, which may in fact help your overall performance. So that may change the payoffs and strategies away from a pure PD.

Some of us discussed that opening earlier for B.F. just shifts purchases ahead in time, and doesn't necessarily earn you more overall profit for the entire season. Forbes had a related comment about that:

A Black Friday spending analysis from [MasterCard] shows a whopping 70% of consumer spending happens at the first two stores a shopper visits.

http://www.forbes.com/sites/clareoconnor/2013/11/28/heres-the-real-reason-stores-are-open-for-black-friday-sales-on-thanksgiving-day/

I guess that makes sense, as shoppers get tired after a few hours of lines, crowds, and cold. Also the article says that consumers allocate 50% of their total holiday budget to B.F. (I assume they got this from exit surveys, which can be problematic, and a lot of customers don't even make a formal budget so it's hard to be sure). So if all that is true, it will incentivize retailers to keep one-upping each other on B.F. But again, thinking about this as a sequential game, during B.F. retailers are fighting for a big slice of the pie (maybe 50% of total holiday spending), but there is still another 50% after. So maybe it is more cost-effective to not "blow one's load" on the B.F. arms race, where competition is fierce, ROI could be lower, and there is more risk. Instead wait as the morons duke it out, and then go on a blitz to eat up all the post-B.F. dollars, after you rivals have depleted their resources. You know, all these lame business-is-war analogies. :)

Lastly, I agree with your point that shoppers bitch about the B.F. issues, yet they are contributing to them at the same time. Maybe many of them have unrealistic expectations that they will just stroll into an empty store at a time that suits them, and quickly get all their wish list items on sale. That is called the internet. :) Assuming that sites don't crash due to heightened traffic.