Friday, November 23, 2012

Black Friday stories and lessons to be learnt

Good morning economists. By the time some of you will be reading this, you will have already concluded your Black Friday shopping. In fact I am writing this post at 3:37 am Eastern time and many of you are probably standing in line in front of your favorite store.

I have posted in the past about how special offers or low prices can affect a person's judgement. If the price is low enough, this can cause consumers to buy a product even though they do not actually really need it. They just consider that the offer is "too good to pass up".

I remember back in 2007 I was affected by the Nintendo Wii hype. The new games console was just released and people were lining up in front of stores on Black Friday to secure one of the limited pieces available. I was one of the many people who lined up in front of my local Target store anxiously waiting for the doors to open. Thankfully I was first in line because I arrived there at 12:30 am. The doors were opening at 6:00 am. Soon enough, about 200 people were lining up behind me.

At around 4:00 am the store manager opened the door and informed us that only 10 units of the games console arrived at that store. He handed 10 coupons to the first ten people standing in line that gave the bearer the right to buy the console in store within the next 24 hours. I was happy and relieved at the same time because I had the valuable coupon in my hand. The people who got the coupons agreed to go home, rest, and come back later in the day to claim their Wii. Upon leaving, I asked the remaining 190 people in line whether they were waiting to buy the console. Pretty much everyone said yes. I informed them that only 10 consoles had arrived and that we already had the coupons, so they could go home or to another store if they wanted.

The result? Nobody believed me even though I was telling the truth. Nobody moved from their spot and when the doors opened two hours later they found out the hard way!

Long story short I ended up buying the Wii only to sell it a couple of weeks later for a hefty profit on the black market (quantity demanded was a lot higher than quantity supplied boosting up the prices).

Moral of the story? Exercise good judgement. Do not allow the special offers to manipulate you into buying things you do not need. Black Friday is based on this phenomenon.

Have a nice, shop hunting Black Friday!

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