I want to open dynamically-priced ice cream shop. I'll set prices based on demand, not based on how much I pay my suppliers for ice cream.
Factors will include:
- Day of the week. Ice cream will be pricier on weekends and holidays. It will be cheaper on Tuesdays than on Saturdays.
- Time of day. At slow times of the day, such as 11 a.m., ice cream will be cheaper.
- Time of year. Ice cream will be most expensive in July and August. It will be cheapest in January.
- Weather. I will raise prices on unseasonably warm winter days. I will lower them when it rains, or when it is unseasonably cold.
- Length of line. If I have unusually long line, I will raise prices. There's no reason to have such a long line outside that I cannot accommodate everyone in a timely manner.
I bring this up because The Atlantic has a fascinating story about restaurant pricing. The piece suggests some restaurants may adopt an airline-type model. When I tweeted the story, several readers mentioned restaurants already vary prices. Yes, many restaurants have happy hour menus or early-bird and lunch specials. But I wonder if we'll see this calculation become more sophisticated.
Here's how The Atlantic put it:
What about the separate question of whether you should pay more on a Friday night than early in the evening midweek? In the economics textbooks, it’s a simple case of supply and demand. And, of course, restaurants already dabble with peak pricing, although most of them would never describe it as such. A 30 percent discount for off-peak diners just sounds tacky. Try a “pretheater menu” instead—so civilized! And no restaurant would be so crass as to add a surcharge to the usual menu simply because it’s Valentine’s Day. Instead, “special menus” are devised for the holiday, giving a decorous excuse for charging extra.
Why should the price of a meal be the same whether it’s served at 5 p.m. on a Monday or 8 p.m. on a Friday?There are limits to how far a restaurant can take such strategies. And thank goodness, most of us would say, because peak pricing privileges the rich. But such arguments are more persuasive when we are talking about access to basic health care or voting.
What do you think? Is it time for restaurant owners to get much more sophisticated with pricing?
And do any of you want to invest in my ice cream shop?