Read Online When to Rob a Bank: ...And 131 More Warped Suggestions and Well-Intended Rants by Steven D. Levitt, Stephen J. Dubner - Free Book Online Page B
Authors: Steven D. Levitt, Stephen J. Dubner
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suspended as a condition for hosting the Games. Spain’s Rafael Nadal has also allowed U.K. tax policy to dictate his tennis playing schedule.
And let’s not forget that the greatest endurance athlete of our era, Mick Jagger, fled the U.K. years ago because of tax considerations (and, also, the police there kept arresting him and his mates ).
Pricing Chicken Wings
(SDL)
The other day, I stopped by a local fried chicken joint, Harold’s Chicken Shack . Just to give you a sense of what sort of restaurant this is, there is a layer of bulletproof glass separating the workers and the customers. They don’t cook the chicken until you order, so I had five or ten minutes to kill waiting for my food.
One of the items on the menu is a chicken-wing dinner. With each dinner, you get a fixed amount of french fries and coleslaw.
The two-wing meal costs $3.03. The three-wing meal costs $4.50.
Since the only difference between the two meals is one extra wing, with that third wing costing the customer $1.47. I thought this was interesting, because if each of the first two wings were priced at $1.47 each, then the implied price of the french fries and coleslaw is a combined 9 cents. So it seems like Harold’s is implicitly charging more for the third wing than for the first two wings, which is unusual since firms generally give quantity discounts.
I read further down the menu:
two-wing meal $3.03
three-wing meal $4.50
four-wing meal $5.40
five-wing meal $5.95
The four- and five-wing meal prices are more in line with how firms usually price.
So what do you think Harold’s charges for a six-wing meal? Here’s the answer:
six-wing meal $7.00
Definitely most bizarre. When economists see things that don’t make any sense, we can’t help but think of some story that rationalizes the seemingly odd behavior. Maybe Harold’s prices the six-wing meal high because it is worried about obesity? Not likely, since every item on the menu is fried. Is the sixth wing especially big or tasty? Is demand by people who order six wings more inelastic?
Perhaps some clues could be found in the pricing of other items. Fried perch are sold in a similar fashion to fried chicken, again with french fries and coleslaw. Here is how perch is priced:
2-piece perch meal: $3.58
3-piece perch meal: $4.69
4-piece perch meal: $6.45
So you get that third piece of perch cheap, but they nail you on the fourth piece. This certainly hints at Harold’s thinking there is some logic to this sort of pricing.
Ultimately, though, my guess is that the person whochose these prices was just confused. One thing I have realized as I have worked more with businesses is that they are far from the idealized profit-maximizing automatons of economic theory. Confusion is endemic to firms. After all, firms are made up of people, and if people are confused most of the time by economics, why wouldn’t that carry over to firms?
Why Are Kiwifruits So Cheap?
(SJD)
I’ve been eating a lot of kiwifruits lately. (You may also know them as the Chinese gooseberry.) At the corner deli near my home on the West Side of Manhattan, I can buy three for a dollar. They are delicious. Unless the stickers are lying, they come from New Zealand. At thirty-three cents apiece, a New Zealand kiwifruit costs less than the price of mailing a letter to the East Side of Manhattan. (And believe me, I consider a first-class stamp one of the greatest bargains ever.) How on earth can it cost so little to grow, pick, pack, and ship a piece of fruit across the world?
To make fruit matters more complicated, I can buy one banana (also imported) and one kiwifruit for about the same price as one apple, which may well have been grown as near as upstate New York. So I wrote to Will Masters , a food economist at Tufts University’s Friedman School of Nutrition.
Most economists, as I’m sure you know, reply to such queries in verse, and Will is no exception:
Damn supply and damn demand:
Why cheap hogs and
And let’s not forget that the greatest endurance athlete of our era, Mick Jagger, fled the U.K. years ago because of tax considerations (and, also, the police there kept arresting him and his mates ).
Pricing Chicken Wings
(SDL)
The other day, I stopped by a local fried chicken joint, Harold’s Chicken Shack . Just to give you a sense of what sort of restaurant this is, there is a layer of bulletproof glass separating the workers and the customers. They don’t cook the chicken until you order, so I had five or ten minutes to kill waiting for my food.
One of the items on the menu is a chicken-wing dinner. With each dinner, you get a fixed amount of french fries and coleslaw.
The two-wing meal costs $3.03. The three-wing meal costs $4.50.
Since the only difference between the two meals is one extra wing, with that third wing costing the customer $1.47. I thought this was interesting, because if each of the first two wings were priced at $1.47 each, then the implied price of the french fries and coleslaw is a combined 9 cents. So it seems like Harold’s is implicitly charging more for the third wing than for the first two wings, which is unusual since firms generally give quantity discounts.
I read further down the menu:
two-wing meal $3.03
three-wing meal $4.50
four-wing meal $5.40
five-wing meal $5.95
The four- and five-wing meal prices are more in line with how firms usually price.
So what do you think Harold’s charges for a six-wing meal? Here’s the answer:
six-wing meal $7.00
Definitely most bizarre. When economists see things that don’t make any sense, we can’t help but think of some story that rationalizes the seemingly odd behavior. Maybe Harold’s prices the six-wing meal high because it is worried about obesity? Not likely, since every item on the menu is fried. Is the sixth wing especially big or tasty? Is demand by people who order six wings more inelastic?
Perhaps some clues could be found in the pricing of other items. Fried perch are sold in a similar fashion to fried chicken, again with french fries and coleslaw. Here is how perch is priced:
2-piece perch meal: $3.58
3-piece perch meal: $4.69
4-piece perch meal: $6.45
So you get that third piece of perch cheap, but they nail you on the fourth piece. This certainly hints at Harold’s thinking there is some logic to this sort of pricing.
Ultimately, though, my guess is that the person whochose these prices was just confused. One thing I have realized as I have worked more with businesses is that they are far from the idealized profit-maximizing automatons of economic theory. Confusion is endemic to firms. After all, firms are made up of people, and if people are confused most of the time by economics, why wouldn’t that carry over to firms?
Why Are Kiwifruits So Cheap?
(SJD)
I’ve been eating a lot of kiwifruits lately. (You may also know them as the Chinese gooseberry.) At the corner deli near my home on the West Side of Manhattan, I can buy three for a dollar. They are delicious. Unless the stickers are lying, they come from New Zealand. At thirty-three cents apiece, a New Zealand kiwifruit costs less than the price of mailing a letter to the East Side of Manhattan. (And believe me, I consider a first-class stamp one of the greatest bargains ever.) How on earth can it cost so little to grow, pick, pack, and ship a piece of fruit across the world?
To make fruit matters more complicated, I can buy one banana (also imported) and one kiwifruit for about the same price as one apple, which may well have been grown as near as upstate New York. So I wrote to Will Masters , a food economist at Tufts University’s Friedman School of Nutrition.
Most economists, as I’m sure you know, reply to such queries in verse, and Will is no exception:
Damn supply and damn demand:
Why cheap hogs and
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