Wednesday, September 25, 2013

Undernews: Why are lobster prices so low. . .until you go to the restaurant

"Since most customers don’t know what’s been happening to the wholesale price of lobster, cutting the price could send the wrong signal: people might think your lobster is inferior to that of your competitors. A 1996 study found that restaurants wouldn’t place more orders with wholesalers even if lobster prices fell twenty-five per cent. As the study’s authors put it, 'A low price creates suspicion.' This helps explain one of the interesting strategies that restaurants have adopted to take advantage of the lower price for lobster: they keep the price of lobster entrees high, but add lower-priced items—lobster bisque, lobster mac-and-cheese, a lobster B.L.T—to the menu. That way, they can generate more business without endangering lobster’s exclusive image."

Another thing to keep in mind the next time you read/hear about how supply and demand and "free" markets work.

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