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Homework answers / question archive / On the way to my mother's house for Thanksgiving dinner, my wife was on her phone and noted that Old Navy was going to be open for Black Friday sales starting on Thursday at 3pm

On the way to my mother's house for Thanksgiving dinner, my wife was on her phone and noted that Old Navy was going to be open for Black Friday sales starting on Thursday at 3pm

Economics

On the way to my mother's house for Thanksgiving dinner, my wife was on her phone and noted that Old Navy was going to be open for Black Friday sales starting on Thursday at 3pm. Many people lament the fact that stores are open very early the day after Thanksgiving or, as it seems, even open on Thanksgiving day itself. The owners, managers, and employees of retail stores presumably would enjoy spending Thanksgiving with their families instead of preparing for Black Friday sales, yet almost every store announces that it will open very early on Friday morning for shoppers. How might game theory offer an explanation for this unexpected behavior?

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We do not often think of stores as typical decision makers, but game theory does provide an interesting take regarding their actions on and around the week of Black Friday. If we look at store opening time, we notice that stores open early because the believe that shoppers would arrive at those times, and other shops would not open during the early hours. Using game theory, the seller wants to maximize his payoff and thus assumes that the best way to make profit for him is opening early irrespective of what the rivals do. If the competitors are not present, then the profits are really high but even if they are open, the profits are significant to justify the opening of the store. For example, 2016 was the first year that Macy’s opened on Thanksgiving Day. While some decried this decision, other stores followed suit and also opened on Thanksgiving because of Macy’s actions. Here, there is a double advantage for the other firms as they believe that Macy's publicity will also provide them some customers.