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Secret Menus
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.
Topics: College, Economics, Food, Markets | 87 Comments »
September 25th, 2009 at 2:00 am
Up here in the bleak and snowy north (Canada), Double Cheeseburgers were once $ 1.39. However about 2 months ago they took the DC off the value menu and replaced it with the McDouble. After a rowdy night off drinking on the ice-flows i stumbled into a McD’s to find out they no longer offered the DC for $ 1.39 i found out the price of cheese has gone through the roof! Well that’s what I remember hearing. Anyways they are on the value menu ($ 1.39) up here now but i think the McDouble is a pretty new invention.
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mmm ….$1.00 McDouble with almost no diminishing rate of marginal utility. I could eat those things all day
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on research I had done on the web; sipaifecclly the links I posted in the show notes.That being said, I don’t think I was wrong in saying that he did more exercise in his film than the participants in the Swedish study. I recall reading that the main thing the subjects complained about was that they weren’t allowed to exercise (sorry I’m at work and don’t have time to find the source at the moment; if you’d like me to I can look later).Also you make a good point that I should have brought up the whole super size thing. I was thinking about it and decided not to just based on having to consider time. But yeah I guess since it’s in the name of the movie it was worth mentioning. In the end I didn’t really see a need to bring up how he supersized whenever he was asked since it doesn’t seem to have much to do with the results. In the end he ate his 5000 calories a day on average and the results were what they were.I did dedicate a chunk of my segment to portion sizes though, which does kind of encompass the whole supersize idea. I tried to make the point that if you eat a normal amount of McDonalds food then that’s not going to hurt you. For sure if you drink an extra large coke at every meal then that’s going to be a problem. But after reading your email I definitely see how I could have tied that sipaifecclly to his experiment of always accepting the super sizing.Please let me know if you can think of any other examples of me making false assumptions or demonstrating bias. I tried to accurately reflect what the scientific opinion is on the subject, and if you think I got something wrong then I would definitely like to know so I can improve my methods going forward.Thanks again for taking the time to comment.~Elan
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