Pricing anamolies
Posted by aogWednesday, 31 March 2010 at 12:38 TrackBack Ping URL

I went to McDonald’s for some fast food yesterday (Boy Two loves McDonald’s “food”) and I noticed that

  • A 10 piece McNugget box was $4.09
  • A 4 piece McNuggest box was on the $1 menu for $1

So, why don’t people buy 3 of the latter for $3 instead of the former, even if you throw away 2 pieces because you’re full?

Comments — Formatting by Textile
erp Wednesday, 31 March 2010 at 13:45

Conditioning and lack of arithmetic skills.

AVeryRoughRoadAhead Wednesday, 31 March 2010 at 15:42

I don’t love McD food as a whole, but I agree w/Boy Two that McD “chicken” nuggets are très bien tasty. And I’m a big fan of McD’s new menu board images and their new restaurant concepts.

It’s probably because most people buy a meal, not just the nuggets. If you factor in the price break on the fries and soda with a ten-piece meal deal, then it’s a wash. And what erp said, of course.

Incidentally, the dollar menu costs a dollar everywhere, but a ten-piece is less expensive across most of the U.S., than it is in Chicago-land. So the disparity is lower for most Americans.

Further, if the price difference was under 50¢ for the ten vs three fours, and for whatever reason I was uninclined to eat twelve, then I’d probably buy the ten to save having to use and throw away three printed cardboard boxes. Save the Earth, don’tcha know.

Annoying Old Guy Wednesday, 31 March 2010 at 16:30

If you’re buying a meal, it’s a different calculation. But these prices were for just the box of McNuggets.

erp Wednesday, 31 March 2010 at 17:08

A couple of weeks ago I had a craving for a McD chocolate shake and was stunned to find a small one costs $2.25.

For years I tried to figure out the best buys for different food items and then realized there are armies of geniuses who are well paid to confuse and obfuscate, package things in odd lots, etc., so I stopped worrying about it and learned to just shop as carefully as I could without getting obsessed.

Now my accountant does the shopping and he’s like putty in their hands. Taking candy from a baby is more difficult than getting him to buy a large item even when the smaller item is the better buy.

It’s too cruel to point it out to him, so I don’t.

Harry Eagar Thursday, 01 April 2010 at 01:13

That was Alfred Kahn’s argument about airline deregulation. He found instances in which it was cheaper to buy two excursion tickets, one from A to B, and one from B to A, than to buy a roundtrip A-B, even after throwing away the unused halves of each excursion ticket.

Believe me, erp, lots of people with high math skills didn’t get that.

And, we don’t know that people didn’t do what Guy recognized was cheaper. All we know is that the company offered two prices that did not scale linearly. Happens all the time.

I live in a place where mayonnaise is very popular, so grocers use it as a loss leader. It is often cheaper to buy a quart of mayonnaise than a pint. It is almost always cheaper to buy a gallon of milk than a half-gallon.

Cheaper is not always the better bargain, though. Even when it is, people, even supposedly sophisticated people, do not always buy cheap. Why did people oay more for a Pontiac than for an identical Chevrolet?

Peter Thursday, 01 April 2010 at 07:43

AOG:

Have you ever been in a line at McDonald’s behind some twit who carefully surveys the entire menu and asks numerous questions of the staff to ensure he is making the most rational economic choice? I have and, as I recall, the silent collective spirit of the entire line wanted to rise up and murder him.

These economic analyses never seem to understand that there are many psychological opportunity costs, and so they simply dismiss the behaviour as ignorant or irrational. For example, whenever we go to McDonald’s, generally on road trips, I am usually so tickled at having cleverly nudged the family away from more expensive fare that I go into Diamond Jim mode to allay their suspicions I’m just a cheapskate. “C’mon Sweetie, life is short. Caution to the wind. Let’s spring for one BIG box of McNuggets!” I then bask in the glow of her grateful swoon.

There are only so many hours in a day and we have to choose which mental stresses and cyber-paper trails we are going to invest in to figure all this stuff out. I don’t pay the slightest attention to air miles, coupons, customer cards, etc., but it isn’t because I’m not aware that I pay a price (although, I hasten to add modestly, I’m known as a master-planner of full-value holidays). Fortunately SWIPIEW does track all this, carries dozens of cards in her purse and knows exactly who is offering 30% off this weekend, although she couldn’t do a weekend getaway without taking out a second mortgage. I’ve concluded such complementariness is far more key to a successful marriage than silly, non-essential stuff like sexual compatibility. There are alpha and beta consumers and a host of emotional reasons why some folks consciously decide to take a pass on all these bewildering deals. It often simply comes down to having other stuff to do or worry about.

BTW, Harry, I love the image of Kahn sitting in the library of his modest home wondering why the little people don’t split discount air tickets to save twenty bucks. What’s the matter with Kansas, indeed. I’d be surprised if he ever flew coach at all, assuming he even flew commerical.

erp Thursday, 01 April 2010 at 09:01

I think it’s a game for some people. A friend is such a good shopper, I wouldn’t be surprised if some day, she puts a basket full of groceries through the checkout and after adding up the coupons, the cashier gives her back $10.00 in cash.

BTW - Happy April Fool’s Day to all?

Annoying Old Guy Thursday, 01 April 2010 at 09:37

He found instances in which it was cheaper to buy two excursion tickets, one from A to B, and one from B to A, than to buy a roundtrip A-B, even after throwing away the unused halves of each excursion ticket.

The airline case is complicated by the “found money” issue with seat occupancy because of the large fixed costs. Airlines could get away with it because of the high transaction costs to consumers of taking advantage of the information. It’s much less common now for that reason.

Peter;

I would say such a fellow’s error is doing it in line, rather than hanging back until he has completed his calculations. In my case, I can calculate such things sufficiently rapidly that it’s not an issue.

But overall I agree with you on transaction costs. I actually keep a rough estimate of my time value for such things and compare how much I could save vs. my time value and if the latter is greater I just go for it.

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