Black Friday has a mixed legacy for Americans. For some it is the best shopping day of the year, a time to knock out Christmas shopping with one blow. For others it is the ultimate example of capitalism driven to excess, as is often visible when news outlets report on a doorman trampled to death by customers. But how do firms view the tradition?
According to a MasterCard analysis of consumer spending habits, 70% of spending on Black Friday occurs in the first two stores visited. Furthermore, consumers spend on average 50.7% of their gift money in the period from Thanksgiving to Cyber Monday. These two facts are crucial to understanding firm behavior during the Thanksgiving season.
This story appears reminiscent of the hoteling model, albeit not a perfect comparison. Consumers will spend their money at the first shop they go to; therefore, by opening earlier, firms can increase their market share. Because there isn’t an equilibrium position, this “retail arms race” will likely continue indefinitely, to the disgust of some consumers.