Black Friday Shopping

Skylar Allen
Mrs. Straub
AP Economics
Tuesday, December 4th


Many people are aware that Black Friday takes place the Friday after Thanksgiving every year. This day is known to be the first day of traditional Christmas shopping. Business owners offer reduced prices  in the form of sales and awesome deals. The deals and reduced prices are benefiting both the business owners and the consumers.The question is, who does it benefit more?

Business owners can use Black Friday to their advantage by reducing prices and creating deals that are better than normal so that it is in the consumers best interest to buy their products causing their business to sell more items and hopefully make a bigger economic profit. Places such malls, are environments in which there is increased competition during this time. This is because when there are two stores who sell similar products or services, they are going to try to make their deals better than one another so that they can attract the most customers, hoping they are making a bigger economic profit than their competitor.

To expand on this and  help you understand how this is related to economics, imagine there are two stores, PacSun and Champs, who are selling the same trendy clothing brand with a high demand, for the same price. When Black Friday comes, they are both going to want to have the better deal on this product so they win over the customer. In order to do so, they will reduce the prices by having a certain percent off. Perhaps even create a deal such as buy one get one fifty percent off. If PacSun were to set a huge deal such as seventy five percent off all Champion products and Champs only has twenty five percent off of Champion items.  This would result in PacSun  to be the clear winner when it comes to customers buying Champion gear. Therefore Champs  is going to have a high opportunity cost since they are losing all of those customers to their competition. Although PacSun may have a good advantage at first they will eventually run into a shortage issue such as running out of those items and being picked over due to the deal that everyone wants to take advantage of. This will cause Champs to then take back some of the customers and be making more off of those customers than PacSun  since their deal wasn’t as good.

Another way to look at this is to create a payoff matrix so that you can see if one of the companies will have a dominant strategy or a nash equilibrium. It’s important to identify this because each company will do what they can to maximize their payoff. Looking at all of the factors that play a role in how businesses benefit and suffer from black friday and the amount of customers and competition, it’s fair to say that businesses benefit from this than suffer.

Moving forward, how the customers are affected by this is a whole new story. I am sure all of you can relate but, when customers see there’s a sale or a deal they want to go and see if they like any of the items because if they do they don’t have to pay full price. Even if it’s the slightest bit of money off they are willing to spend money they might not even have because it’s on sale or part of a good deal. Keeping in mind the same example as before about PacSun and Champs selling Champion products, if a customer buys from the store with the lesser deal or sale they have a high opportunity cost because with the money they are spending on Champion at Champs, they could be spending on more Champion items at PacSun. Although customers are saving money by taking advantage of all of these huge sales, are they really watching what they spend? According to, What Is Black Friday “Sales and Trends, there was a 4.3% increase in total sales from 2017 to 2018 with the total amount spent being $682.0 billion in 2017 to being $717.5 billion in 2018.” Their data also says there was an individual average of about $1007.24 spent shopping this black friday. This shows that when customers see deals they take advantage of as much as they can before their satisfaction levels start to decrease which is also known as the marginal cost.

Relating this to economics we can see how much people are willing to spend when they are not paying the full price for something. Through this we are able to see many different opportunity costs based off of what they are buying and other deals that might have been more beneficial to them. We are also able to see that the demand for certain products will dominate the sales of the day before stores start to get low on those products or they become to picked over. Since the sales start the night of thanksgiving a lot of the time, which is giving the stores a head start on sales compared to those who aren’t open that night and only on black friday, customers will oftentimes go both at night on thanksgiving and the day of black friday to make sure they can get as much as they can on sale before they start to lose interest in all other products. Customers are willing to spend so much money on all of these sales because they are so rare. This means that customers are benefitting from getting sales on all of these items but they are also spending so much money on all of this that they could possibly be spending on something else.

Overall business owners and customers both think they benefit enough from this to continue to participate so even if they do suffer somewhat from doing this the benefits overpower the bad things. Black Friday is a day full of economics and people don’t even think about it because they are so strung up on all of the deals and how much the are getting for their money or how much economic profit they are receiving from their customers by participating in this day.

Works Cited

Amadeo, Kimberly. “How Much Do Americans Spend on Black Friday?” The Balance Small Business, The Balance, www.thebalance.com/what-is-black-friday-3305710.

“How Does Black Friday Work?” Economics Stack Exchange, economics.stackexchange.com/questions/9531/how-does-black-friday-work.

“What Black Friday Teaches Us About Supply and Demand.” WordPress Howto Spotter, 27 Nov. 2007, www.howtospoter.com/money-making/what-black-friday-teaches-us-about-supply-and-demand.