The Answer Is Transaction Costs All You Can Eat, or By the Ounce?
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Aug 22, 2023 Exploring the concept of transaction costs and its influence on pricing and packaging policies in the restaurant industry. Discussion on pricing options for salad and food bars, including all-you-can-eat buffets by the ounce and the challenges they present. The process of valuing food inventory in a buffet-style restaurant and the benefits of pricing by the ounce. Comparison of cost savings of pricing by the ounce versus all you can eat. A funny incident involving Keynesian economists on a moose hunting trip and their unexpected optimism in the situation.
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Pricing Shapes Who Shows Up
- All-you-can-eat and by-the-ounce pricing create different incentives and selection among customers.
- Transaction costs and adverse selection explain why restaurants choose one packaging over another.
Price By Weight To Cut Waste
- Use by-the-ounce pricing to reduce waste and allow fair pay-for-what-you-take.
- Offer takeout by weight and two-part tariffs to capture customers who prefer smaller portions.
A Single Price Hides Huge Variance
- Single per-person buffet prices force the restaurant to set an average cost that masks huge variation in portions.
- That average creates cross-subsidies from light eaters to heavy eaters and complicates pricing fairness.