I wrote a dairy about the earlier and earlier opening of retail stores for "Black Friday" sales several years ago. But the situation has gotten worse, with more stores opening on Thanksgiving day itself, so I thought I would go through this again.
I am going to assume that earlier shopping does not increase the total amount of holiday retail spending that people will do. Few have an unlimited budget, money spent on the evening of Thanksgiving is money that will not be spent later in the season.
If that is true, stores opening early will not increase the total retail revenue of the whole retail business. The business as a whole will actually be a bit worse off, since they will have to pay the costs of being open an extra day or at midnight, with more overtime pay and utility costs. So why are stores doing this?
Game theory show us why. Let us try to show this with a simplified example. Imagine that there are 2 retail stores, and a fixed amount of retail revenue available for them. If neither of them open earlier than normal for Black Friday, then their relative payoff is both 0. If both of them open early, they both have the same market share and total revenue that they had before, but more costs for being open early. So both get a relative payoff of -1. If one store opens early and one does not, the store that opens early is assumed to get more market share, so it has a relative payoff of 2, while the store that does not open early loses market share and gets a relative payoff of -2.
store 2
open early don't open early
open early -1, -1 2, -2
store 1
don't open early -2, 2 0, 0
People who are into game theory will recognize this as a similar structure to Prisoner's Dilemma. The main feature is that for each store, they are better off if they open early, no matter what strategy the other store uses. But paradoxically, both stores are worse off if both open early than if neither do.
Once one store opens early and breaks the ice, the others feel they have to open early also, or lose market share. But everybody is a bit worse off.
The same sort of thing can happen with pollution, or with outsourcing. The free market can force costs on society as a whole. The only way to change the result is to change the game somehow. But to do that, society as a whole has to set some sort of rules, just as you have to have rules for baseball or basketball to make it possible to have a game. But the current conservative philosophy opposes that sort of cooperation. The actual result is that those with the most private economic power make the rules, with no accountability.