With Black Friday around the corner, North America will have a very different experience of this retail holiday than the last decade.

Since the inception of malls, shopping in person has been wildly popular amongst consumers, they are able to view their products and try it before purchasing, which are major benefits for making the payment decision. However, competition arose when online giants such as Amazon, eBay and various dedicated websites started to gain traction. This has created the current online shopping culture, buying from the comfort of our home and delivered to our doorsteps.

The circumstances surrounding this year is worse for retail and malls. The ongoing pandemic is likely to last through most of the major holidays for shopping; Black Friday, Cyber Monday and Boxing Day. Many of the retail chains have already been closing down some of their less prominent locations and with social distancing and various lockdown throughout the current event, shopping in person has never been more unpopular. On the other hand, the boom of online shopping is going on strong as it became one of the best ways to cure our retail needs in this global situation. Not all hope is lost, with every turn of events comes an opportunity. At the moment, many of the stores are closing their physical location, this in turn opens up more avenues for bigger chains to leverage.

One of the interesting factors about Game Theory, is that it even appears in choosing the location for retail shops. The reason why similar businesses open next to each other is due to this configuration being the Pure Nash Equilibrium where both parties cannot deviate from the current location to gain anymore benefit.

Let us consider the following situations (from TED-ED)¹. Two competitors are selling ice cream on the beach. In the first scenario where a line down the middle separates them, and they each occupy their own halves. In this case, both parts would get half of the sales, but there is a better play for one of the stores. Consider figure 2, where Ted moves to the middle, now he gets his original sale and splits the sale between ½ mile and ¼ with you. Both parties would continue to move to the advantageous position until they both settle down in the center where they cannot deviate from that position to gain any benefits.

Figure 3: both parties reaches Nash equilibrium

Figure 4: payoff matrix, we can see Pure Nash Equilibrium is opening shop at the ½ mile together.

How this does apply to the current pandemic? With the closing of many stores, the bigger players of retail sector can purchase more storefronts to obtain a bigger payout than their competitors in physical locations. Consider the previous scenario, however, this time Ted has 2 stores instead. In that case, you will always obtain a lower payout than Ted where he can surround your store on either ends and taking over half your sales. Normally, this would not be achievable due to the cost of purchasing storefronts and competitors owning a location nearby. But this pandemic has opened up many retail spaces for taking.

Next, let us consider the e-commerce side of shopping. With the current pandemic, a lot of the purchases are being made online in e-commerce giants like Amazon. With this in mind, would it be more beneficial for current market to purchase more storefronts to attack competitors on the physical locations side, or is the money better spent on establishing their own online store and delivery routes instead? The answer to this question lies within the payoff of each situation and it’s hard to calculate without knowing the specific numbers. Even with the current pandemic, we can see that the percentage of sales rising from e-commerce is still only a fraction of the sales a store can gain from having a physical location. However, we are comparing the gains of purchasing more storefronts vs diversifying and investing the funds into producing an online shopping solution. If we were to construct a payoff matrix, the matrix itself would not have any Pure Nash equilibrium and instead would be mixed strategy. As the best strategy would depend on the expected payout and the company would then split their funds accordingly.

Figure 5: percentage of E-commerce sales of total retail sales (Statista)

Figure 6: Example of a payoff matrix for investing into physical location vs online solution.

In conclusion, this Black Friday might be the first mark towards a very different shopping experience in the next decade. If the sales figure points to online shopping producing a better net sale, then it is possible more retail giants would not hesitate to close down their less popular locations and invest into a better e-commerce. However, if the sales figure points towards the traditional method being superior, then we might see the bigger players of retail popping up more stores over the next few years. Although, a major factor to consider, and the creator of this situation, is how long will lockdown and the global pandemic last. This factor will also be a major player in deciding the retail landscape for the next decade.

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With the number of large scale political and economical disruptions this year. We are going to examine the current networks of relationships between the top countries and identify the balance between them.

In 2020, many world changing events has happened, will happened or is still ongoing in many parts of the world. To name a few, the one most people are familiar with is the current worldwide pandemic of the Coronavirus, affecting nearly the entire world and bringing us into an unprecedented time. Moreover, it has visible effects on the political landscape for the major powers, straining the relationship of many countries with China. In addition, this pandemic has incited the banning of Chinese technology from U.S. and India. Furthermore, the resignation of Japan’s prime minister Shinzo Abe, leaves way for a new prime minister who has the power to steer Japan into a different political mindset. Lastly, the 2020 election for U.S. will be conducted soon and depending on who gets elected, it will again steer another superpower into a different direction in terms of international relations.

Today, we will examine the top countries by their Nominal GDP (one of the measures for a country’s international economic prowess) in 2019 with their respective percentage to the global GDP:

U.S. Nominal GDP: $21.44 trillion (23.6%)
China Nominal GDP: $14.14 trillion (15.5%)
Japan Nominal GDP: $5.15 trillion (5.7%)
Germany Nominal GDP: $3.86 trillion (4.6%)
India Nominal GDP: $2.94 trillion (3.3%)

Relation of each country with each other

U.S. – China:

Through the outbreak of the novel Coronavirus, the two countries has soured their relationships in recent years. The animosity began brewing since 2018 when the trade war between the two countries, with increased tariffs and duties from both sides. Lately, the U.S. government also threatened to banned one China’s best international technological success, TikTok, after the blacklisting of another Chinese tech giant Huawei.

U.S. – Japan:

The two countries have extensive military cooperation in which the JSDF would train together with the U.S. military. In addition, Japan is considered one of the United State’s major non-NATO allies.

U.S. – Germany:

Both countries are allies under NATO, and has a close relation since the 1950s, with Germany outsourcing its military security to the United States. During the reunification between East and West Germany, the U.S. had also given its fellow NATO member massive support and was a major player in pushing for German reunification.

U.S. – India:

India and United States are working towards strengthening their relationships through various exchanges; such as economic, military and cultural to name a few. Furthermore, U.S. is assisting with the installment of nuclear reactors in India to provide alternative energy sources for its ally.

China – Japan:

The two government are working together to amend the past animosities and aiming to forge a new era of relationship. The two countries have bonded over the global pandemic through sending each other P.P.E equipment and testing kits. However, the general public of Japan still has a negative view of China, although the opposite has as generally positive view of Japan.

China – Germany:

The EU has been harboring animosity towards China for its human rights abuse and the recent outbreak of the novel virus.

China – India:

With the ongoing skirmishes between the two countries, followed by the clashing investment in Africa, the relationship between China and India is strained and dire. Recently, the outbreak of the global pandemic has worsen the situation and India strikes back by banning 100 plus Chinese apps, including TikTok and PUBG, hugely popular apps in India.

Japan – Germany:

Japan and Germany have a long-winded partnership with each other. Through its alliance in WWII to the current day economical partnership. The two countries are in great terms with one another and continues to further strengthens its relationship.

Japan – India:

Like many others, the two countries has a strong economic relationship and has extensive trading arrangements with each other. Japan is stated to double its direct investment and number of Japanese companies in India, hoping to build a stronger relationship together. Furthermore, India responded by providing the “Japan Plus” office, where Japanese companies can leverage to resolve problems faced in India.

Germany – India:

There is a great economic bond between the two countries through its extensive trading relationships with one another. Also, Germany is the largest trading partner of India within Europe.

Network representation of the relationships

The following network is the representation of each countries’ relation with each other. Red represents animosity and green represents friendship or collaboration.

The relationship network of the 5 GDP leading countries.

Analysis of the network and its structural balance

We can quickly identify the unbalanced triangles within the network, China-Japan-Germany, China-Japan-U.S. and China-Japan-India. Here we can quickly see that the root cause of the unbalanced nature of the graph is because of Japan and its friendly ties with China. Without, Japan’s friendly tie with China, the top 5 economic power of the world will be able to achieve structural balance, with a global coalition of China against the rest of the top countries.

As it stand, the network is not even able to achieve a weak structural balance, as 3 out of the 4 triangles formed with China are unbalanced triangles with 2 positive edges and 1 negative edge.

Conclusion

In summary, Japan is a vital key to the current balance of the network. With the resignation of Shinzo Abe, who proposed the goal of achieving a new era with China, the Japan-China relation might head towards a different direction with China’s poor reception in the public eyes of Japan. However, the ongoing 2020 U.S. election might produced sway the currently relationship between Japan and United States as well. Although the two countries have had a great military and trading partnership, it is undeniable that the United States has caused the greatest atrocity to every hit Japan. Furthermore, if U.S.’s relationship with China continues to worsen, Japan will have to reconsider its stance and might have to ultimately choose a side between the two superpowers of the world. Ultimately, the 2020 election and the new prime minister of Japan will be the key to deciding the structural balance of the top 5 countries’ relationship.