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Will retailers ever stop opening earlier on Thanksgiving? Not a chance.

  • Blog Post by: John Ewoldt
  • November 18, 2013 - 3:13 PM

Wal-Mart will open two hours earlier on Thanksgiving than it did last year. Target opens one hour earlier. Best Buy, six hours earlier. Will the one-upmanship ever end?

Not a chance-- if you believe in the game theory called the "prisoner's dilemma," said Mark Bergen, associate dean of marketing at the Carlson School of Management at the University of Minnesota. The original prisoner's dilemma involves two members of a crime ring who are arrested and imprisoned. Each is in solitary with no means of speaking to each other. The police admit they don't have enough evidence to convict the pair on the charge, so they plan to sentence both to a year in prison on a lesser charge. The police offer each prisoner a bargain:

+If A and B both confess to the crime, each of them serves 2 years in prison.

+ If A confesses but B denies the crime, A will be set free whereas B will serve 3 years (and vice-versa).

+ If A and B both deny the crime, both of them will serve 1 year in prison.

According to the game theory, betraying your partner always rewards more than cooperating with them. The same theory has played out before our eyes for several Thanksgivings now. Each year, the a new retailer decides to open earlier to give itself an edge. (Best Buy and Wal-Mart opening at 6 p.m. on Thanksgiving, for example). And the earlier openings do give those retailers an edge, said Bergen. They may get 20 or 30 percent share instead of 10 percent, he said in an example.

But what's interesting is that overall, retailers are not benefiting much. There is no net benefit to opening early since they all do it, said Jean-Pierre Dube at the University of Chicago Booth School of Business. "They 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, said Dube, is the lack of an obvious way for retailers to get out of the situation.

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