A number of big retail chains, such as Walmart, Target, Macy's, and Best Buy are planning on opening at midnight after Thanksgiving, starting the so called "Black Friday" retail push at the earliest possible moment. Some employees are complaining. Why are the retailers doing this?
The answer gives a small demonstration of how the "invisible hand" can lead to inefficiency.
Black Friday midnight madness is sweeping the retail world. Some employees are not happy about it. Target employee Anthony Hardwick launched a petition drive against it that already has more than 185000 signatures. I did notice some nasty comments on some articles to the effect that these employees are lucky to have jobs, have no right to complain and should just shut up.
What do the retailers hope to gain from this? Will shoppers end up spending more for the holidays in total than they would if they could not go to the stores in the middle of night after Thanksgiving? I doubt that opening in the middle of the night will increase total holiday spending. If one retailer did open earlier than the others, it might increase their share of total sales. But if all retailers open at midnight, then no one can gain much market share. Thus everyone will have some extra costs for opening in the middle of the night, but the total pie and each retailer's share of the pie will be about the same. The employees have their Thanksgiving day holiday disrupted, so they come out behind.
So maybe no one will win because of this trend. So why does it happen? Game theory can help understand this situation.
Here is the paradox. Each individual retailer will be a bit better off if they open at midnight than if they don't, no matter what the others do. But all retailers would be a bit better off if none of them opened at midnight.
If only a small percentage or no retailers open at midnight, then an individual retailer might gain some market share by opening at midnight, so would be better off. If most or all retailers open at midnight, then a retailer who did not would lose market share to the others and would be worse off. So all retailers are pushed to open at midnight. The result is that all are a bit worse off than they would be if none of them opened at midnight, since they will have extra costs being open in the middle of the night without any expansion of the total market for holiday shopping. The employees are worse off too, losing part of their Thanksgiving holiday.
Competition can lead to things being better for consumers. The holiday sales on Black Friday and the rest of the holiday shopping season do reduce prices for consumers. Though I have been getting disillusioned by the massive consumerist push for the holiday season. But the point is that this midnight opening illustrates how markets can sometimes lead to inefficiency, and to making life harder for people. The whole point of the economy should be to serve the needs of people. The market is a means to that end, but we cannot assume that bit will always lead to that end if left to itself.