A Suboptimal Equilibrium: Night Life
Why does clubbing have to start at 11PM?
Does anybody really want to begin partying close to midnight?
Maybe I’m just prematurely geriatric to prefer to go to sleep at a time that permits me waking up in the morning, but I don’t think so; I think everybody would prefer that bars, night clubs, etc. opened and were populated earlier so that we could all end our nights before the witching hour (3-4AM).
So, if this is the optimal social outcome, why isn’t this what happens?
The answer: it is not the individually dominant strategy to be intrepid early bird who has to loiter about the discotheque for three hours from 8PM to 11PM.
Although it would be socially optimal for everyone to head out around 8PM1 , it is no individual’s best response to do so. Therefore, we end up in a Prisoner’s Dilemma situation wherein the Nash Equilibrium is collectively suboptimal and is inexorably so, despite the individual participants knowing that they would all be better off if both chose to show up early. Instead, both players (partyers) know, if they show up to the club at 11PM—due to social conventions, expectations formed by the repeated nature of the game, etc.—that the venue will be packed. Since partyers derive increasing utility the more partyers there are at the club2 and suffer opportunity cost waiting for the party to get started, of course it is fashionable (and economically rational) to be late instead of early.
A potential solution to this problem is changing the rules of the game. For example, night club owners could create a rule that you are not permitted in the club unless you’re in line at 8PM. Now, the partyers know that people partying at this club
will be doing so beginning at 8PM (or not at all). Therefore, it is each individual partyer’s best response to show up early because they know the network effects will be kicking in when they show up.
I think such a rule change might even be profitable for night club owners who occupy a market with many firms and are constantly seeking ways to differentiate themselves from their competitors. Changing the opening and closing hours could be used a horizontal differentiator just like the type of music played inside.
After all this pseudo-game-theoretic rambling, what, you may very well be wondering, is my point?
I ought to open an 80s-themed roller skate disco where REO Speedwagon is played back to back. . . to back. Unfortunately, such a club is probably too differentiated and would not serve a big enough market (read: just me) to render it profitable. Alas. If I become fabulously wealthy, I will realize this plan and all my readers are invited.
I’m just spitballing with the numbers here. Accept the conceit and chill out
Up to a point: The law of diminishing marginal returns is at play here and, at a certain point, additional people produce negative marginal returns for the people in the club that can now only shuffle instead of dance.