09 Apr 2013

Guy Calls Cops on Fish Fry Buffet

Economics 2 Comments

At first I couldn’t believe the elementary error* in this Ozimek post which “proves” health insurance and all-you-can-eat buffets don’t exist, but that’s not important now. The important thing is to watch this short video.

* Gene Callahan spotted it too, but let me put it more succinctly: How can there be restaurants at all in a market? I mean, a customer is only going to purchase a meal if he gets more out of it than it costs. But that means the place goes out of business. QED. (Yes I realize Ozimek is trying to give the essence of the lemons problem, but his actual argument came out wrong.)

==> Humorous fact: I discovered a Chinese buffet near my office, and for a while I was going there like 4 times a week for lunch/dinner (meaning, I combined them into one gigantic meal that would have horrified Mark Sisson). I broke out of this destructive pattern when the place went out of business soon after I discovered it. Correlation yes, but causation? We can never know for sure in the social sciences.

2 Responses to “Guy Calls Cops on Fish Fry Buffet”

  1. Tel says:

    Correlation yes, but causation? We can never know for sure in the social sciences.

    So your conscience is clear, right?

    Look, economists tend to be dreadfully linear people, but food (especially restaurant food) is highly nonlinear. Imagine you take your average meal size and try to eat three times that… it’s tough. Try to eat four or five times that for a week straight… it’s impossible. The “value” at a restaurant includes many factors like atmosphere, time of day, service quality, etc. So “all you can eat” places tend to focus on delivering food, but don’t offer much service — generally you serve yourself. They also tend to be the places that give you a push along if they see you sitting around and not eating.

    So they cater for people who want to fill up with food, and who don’t want too many extras beyond that. In effect, each customer buys one stomach worth of food, because that’s all they can but. Adam’s idea that someone “eats $300 worth of fish and is charged exactly $300 for it” is ridiculous when the standard meal is $16 is ridiculous. That guy would have to eat 18 times a standard stomach worth of food (picture it in volume space with your hands).

    Note that the non-linearity of food also shows how the price is affected by a shortage. Someone who has just eaten a meal doesn’t really care about the price of fish, but someone who hasn’t eaten for three days will pay whatever he has.

  2. Wonks Anonymous says:

    A buffet is not like other restaurants. It has to charge a high enough price to cover the average cost of a patron. That cost will be more than some people (who we can assume are likely to eat less) are willing to pay for it. The loss of those below-average customers will raise the average cost of a customer. You can keep on repeating that. In real life marginal revenue does not equal marginal cost, and many people will eat at a buffet even if they aren’t getting a better deal than they would at another restaurant. I also suppose there are significant fixed costs so it may not cost so much for the restaurant to provide more food (I suppose fixed costs could also result in a theoretical death-spiral for regular restaurants).

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