Black Friday - Positive and Negative Externality

With millions of people throughout the country out shopping on Black Friday, the deals offered by stores like Wal-Mart, Target, and many others is a positive externality to many smaller stores and restaurants.  Black Friday causes a large boost in traffic for restaurants and other stores located near malls and shopping centers.  It has also become a positive externality for UPS and FedEx as a large portion of the Black Friday deals are now offered online and cause an increase in shipments.

Although it is a positive externality for many stores and companies, for me it is more of a negative externality.  I have never been shopping on Black Friday, but every year I hate having to drive anywhere on this day because a 10-minute drive can turn into a 30-minute drive waiting in traffic because of all of the people out shopping. 


Miz Ava said...

Thanksgiving travelers and Black Friday shoppers create positive externalities for gas stations as well. Shoppers will need to fill-up their cars and stop for snacks to refuel their bodies before returning to the mall. For those that choose not to shop on Black Friday, they can enjoy a quiet home while everyone is shopping. During the holiday stores can expect a spike in alcohol sales.

Another negative externality of Black Friday shoppers and Thanksgiving travelers is the increase in automobile accidents. I think that this is primarily due to the overall increase in traffic and intoxicated drivers.

Trevor said...

There is another positive externality that can be linked to Black Friday, albeit a surprising one. While small, independent retailers have long cried the woes of being pushed out by the big-box stores that dominate Black Friday, they are also enjoying a recent reaction to the long lines and rock bottom prices that Friday brings each year: Small Business Saturday. Patrick is hinting at this when he says that “Black Friday causes a boost in traffic for restaurants and other stores located near shopping centers.” In addition, recent evidence suggests that it isn’t just small stores with a lucky location that are benefiting on Friday itself, many small businesses are enjoying the consumer reaction to Small Business Saturday.

Created in 2010 and championed by American Express, Small Business Saturday encourages shoppers to buy and save at local shops. In many ways, the new shopping event is pushback against the negative attention (crazed shoppers, riots and injuries etc.) Black Friday has received in recent years, as well as the blatant consumerism associated with the big box stores. In continually promoting their best deals, and opening earlier and earlier each year (with Target opening at 9:00 PM Thanksgiving Day, you have to wonder where the line is between Black Friday and the morphing Black Turkey Day) the big box stores have actually created a positive externality for their smaller competitors. In fact, a USA Today article claims that 36% of independent retailers say Small Business Saturday is their most important shopping day of the season.

Dr. Tufte said...

Patrick: 100/100
Miz Ava: 50/50
Trevor: 50/50

Patrick: this is a great example of positive externalities. Thanks for bringing it to the discussion. I also liked your negative externality, which applies in many situations; like driving on New Year's Eve, or in my family's case, trying to drive into downtown Denver a few weeks ago in the middle of the football game, and not just before or after.

Miz Ava: do you really think there's an increase in drinking over Thanksgiving? Maybe it's just me, but I've never thought the elasticity of drinking with respect to Thanksgiving was positive.

Navel Gazing: I don't tell this story much, but 35 years ago an older cousin took me shopping on Black Friday (the only time I ever went), and then took underage me to a bar. He's in the 1% now. Go figure ;)

Julia said...

I agree with Patrick that Black Friday is a positive externality. The reason I agree is because if the Black Friday sales did not exist then the people would not spend any money, which would not be good for the economy. Since there are Black Friday sales in the major retailers, i.e Sears, J.C. Penny, the economy is boosted.
As for driving and accidents I agree that it is negative externalities , because it slows things down. But as the saying goes "All roads lead to Rome" which means that there is more then one road to get to where you are going.

Dave Tufte said...

Julia: 50/50.