By Chris | September 24, 2009
As happy as I am with the buzz generated by my last post, I feel the need to update so new visitors are greeted with something a little more upbeat. A post about fast food and cable television (the keys to a good life) seemed to fit the bill.
Tyler Cowen recently blogged about secret menus at Chinese restaurants. Often, items are sold to Chinese patrons that aren’t listed on the menu. (I have enjoyed secret dishes at the premier Chinese restaurant in my town.) Tyler suggests this may be an effort to discourage non-Chinese business. I find it more plausible that the practice allows restaurants to cater their menu to American tastes without alienating ethnic customers. Commenter Scott Summers makes the case for an alternative explanation:
There is also price discrimination. Prices are often cheaper on the Chinese menu, as Chinese patrons are often more price conscious. This is partly reflected in the Chinese language options for tables of 4, 6, or 8. In Chinatown one will often see Western couples dining at small tables, while the Chinese often occupy large tables with family or friends. The Chinese pay a lower price per meal. I don’t recall seeing any English prices for multiple entree options.
I was reminded of secret menus while talking with a fellow graduate student about cable television. He enjoyed a 6-month free trial of basic cable through our local monopolist, Cox Communications. When it ran out, he canceled his service and signed up for it again. Cox ran the promotion as the country was preparing to switch from analog to digital television. It hoped to attract new customers wanting to avoid the hassle of switching to the new technology. The promotion was nearly a year old, but he encouraged me to give them a call and ask for it anyway. A five minute phone conversation later I had 6 months of free basic cable.
I love McDonalds. One of my great fears is that McDonalds will stop selling two apple pies for a dollar. Most McDonalds sell double cheeseburgers for one dollar. However, my local McDonalds charges over two dollars for them. Apparently, cheap double cheeseburgers in a college town cannibalize the sales of more profitable items. The other day, while buying some apple pies, I saw an off-duty employee buy an item that wasn’t listed on the menu: the McDouble (pic). The McDouble is a double cheeseburger with only one slice of cheese. Everything else is the same. McDoubles are only one dollar, if you know they exist.
Secret menus are successful means of price discrimination for two reasons.
1) They conceal price information that only the most price sensitive customers will seek out. If I wasn’t so cheap, I wouldn’t have been so intrigued by the McDonald’s employee’s strange order.
2) They require customers to be assertive to receive the preferential price. Timid and/or price insensitive customers may shy away from inquiries that make them appear cheap. It’s a little intimidating calling to ask for 6-months of free cable, when you’ve seen no evidence of the promotion. A roommate in college hated the process of haggling with street vendors. He overpaid for everything. I think this explains the approach credit card companies take with late fees. If you call the company, they will always forgive the penalty for a late payment. However, many customers just pay the fine rather than make an unpleasant phone call.
As long as we’re on food, I learned in this documentary that most McDonald’s food is a product of corn. The movie is a little slow at times, but interesting nonetheless.