I am supposed to be relatively rational since I have been studying classical Economics for more than 10 years. However, I am often surprised by my irrational first reaction when I see some new promotions. For example, I sometimes feel uncomfortable to get a good deal (something I really need and at a reasonable price) if I find that there was a better deal recently that I missed. I consider this as irrational because it is usually difficult to predict future promotions and there probably is no better deal in the future. Some "hard-core rational" economists may argue that this is still rational but my utility function has a unique shape to rationalize this reaction.
But usually I do nothing after the first reaction and think deeper before I move. That's why I cannot be a "Thanksgiving shopper" who needs to move fast without thinking. And I do not regret because I think of the "Thanksgiving style" as one of the tricks that merchants could "steal" money from people's pockets. To believe that you are getting the best deal ever and to buy fast without thinking is exactly what the merchants would like to see, so they exhaust their brain power to create all types of new ideas to trick buyers into this crazy circle: compete to buy no matter what --> feel good about getting the "deal" --> buy more aggressively and irrationally......
I do not rule out the possibility that someone did get some very good deals out of this crazy shopping season, but on average, I believe the firm surplus is definitely higher than the consumer surplus. And I am not sure whether the total surplus is positive. If you think of the people who blow their credit cards just to get some "good deals" and turn out to own something useless and a heavy debt, you may start to believe that this may even be one of the reasons of the financial crisis. Not to mention those Thanksgiving tragedies in history (crazy people trample on innocent shoppers just to get into the store...). One of my favorite episode of "Grey's Anatomy" (a TV show of doctors) happens in Thanksgiving shopping season.
I am always wondering what the optimal strategy is for a company to survive the competition during this season. Are those also benefit the society as a whole? (In economic lingo: Are the social welfare also optimized?) Are there any other regulations to make this world a better place?
This may be a topic that is too big for me to talk about. But I would like to point out two interesting fact in this year's shopping season.
The first one was started with a while ago by a company called "Groupon". You would be amazed to find out how many similar companies are there in the world nowadays. Name a few: Livingsocial Deals, Eversave, Savemore, Plum District, ... Do they look familiar? You probably have seen these names a lot in your junk mails. Their business models are all the same: to help merchants advertise by offering discounts to consumers. This business model has certainly brought a lot of money to these companies , and Groupon is about to IPO soon. But you want to talk about whether it brings value to the society? I will have a start a new long discussion in another post.
The other fact is American Express (Amex)'s new move to support small business. Google "Amex, Small Business" and you will find tons of discussions on their numerous promotions. I think this could be potentially a smart move, because in this economic down-term period, it is hard for the "big guys" to recover and small business may be a way out. But nothing is guaranteed, we will have to wait and see, and at the same time, keep our figure crossed.
No comments:
Post a Comment