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Retailers face "prisoners' dilemma" by opening on Thanksgiving

November 04, 2013

Chicago Booth expert discusses predicament shared by all large retailers in pushing up shopping season

Macy’s and J.C. Penney are two major retailers taking heat for squeezing out Thanksgiving and opening on what many believe to be a sacred national holiday.

But as wrong as many believe it is to push Black Friday into Black Thursday night, there are competing forces at work that put retailers in a no-win situation.

Jean-Pierre Dubé is the Sigmund E. Edelstone Professor of Marketing at the University of Chicago Booth School of Business, whose areas of expertise include pricing, advertising and retailing. Dubé considers retailers’ decisions to open on Thanksgiving a classic example of the game theory of retailing and the “prisoners’ dilemma” – a situation in which two entities (in this case, competing retailers) could gain important benefits from cooperating or suffer from the failure to do so, but find it difficult, expensive or nearly impossible, to coordinate their activities to achieve cooperation. 

“There are two forces at play causing large retailers to keep pushing forward when they open their stores: If you are the first to open, you potentially ‘win’ the pool of eager customers, who will come to you first,” Dubé says.

“But if your competitors are opening early, you need to defend yourself by also opening early or you will lose a lot of prospective shoppers,” explains Dubé.

“All the large retailers face these same forces.  So, not surprisingly, more and more retailers are opening early (i.e. 8 p.m. on Thanksgiving).  This means there is really no net benefit to them from being open early since they all do it.  Meanwhile, they all incur the costs of the early opening – having to pay employees holiday wages and possibly damaging consumer goodwill by opening on Thanksgiving.

“What makes this a prisoner’s dilemma is the fact that there is no obvious way to coordinate out of this situation.”

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Media advisory: Pr. Dube’s comments may be used in whole or in part. He can be reached at jdube@chicagobooth.edu or 773-834-5377.