The Economics Behind All-You-Can-Eat Buffets

Econ Blog Post 2
All-You-Can-Eat Buffets
Yongxin Shi, Period 1

 It is the time of the year when my family starts to celebrate Chinese New Year, and apparently, there will be many high-calories eating happened in restaurants. When I was a kid, I was not aware of the calories at all. In buffets, I ate whatever I wanted, and obviously tons of them. However, as I grew older, I started to consider choices, the numerous—almost overwhelming—food options, in the buffet. After learning some economic concepts, I could break the whole buffet choices down to the opportunity cost of foods. For example, the opportunity cost of not eating whatever I want would be my unfulfilled greed from craving all kinds of mouth-watering food, whereas the opportunity cost of eating whatever I wish would be guilt of eating too much and spending much more time to burn the extra calories.

Since I knew that my stomach would hurt if I eat a lot and I will absorb many bad calories that would take me a long time to reduce them through workouts, every time when I go to the buffet with my parents, I will start to plan my big meal ahead. For example, I will consider what the most efficient way of eating more pricy food to win back the money that I pay to the restaurant without having the feeling of guilt of consuming vast amounts of calories is. And here, my definition of the pricy food is like choosing the raw salmon from Japan instead of eating a regular Hamburg or French Fries in all-you-can-eat buffets. Yet, sometimes, I wonder how and where do all these all-you-can-eat buffets get their profits?
While I was doing the research for my blog, I came across a research paper that was published back in 2014. The heading of the study, “Lower Buffet Prices Lead to Less Taste Satisfaction,” catch me as soon as I opened the document because it is a new angle in which I never considered before. In this study, through a field experiment, the researchers found out that a lower buffet price leads to a worse expectation for the food and then creates a downward trend as people consume the addition. In contrast, for a higher buffet price, consumers tend to have a more enjoyable experience and find the foods to be tastier, and mainly due to the higher rate. Primarily, the low-price strategy only works when the restaurant just opens and wants to attract more customers. However, in the long term, the main point of driving restaurant business is building loyalty which means that the higher-price strategy would work better since people often find that a higher price is equivalent to a better taste in the food from the buffet. In my opinion, the higher-price strategy not only stands for a more significant profit margin—the cost of inputs, including the fact that it is self-served and less demand on the food servers, is less than what customers pay for the outputs, but it also prevents the buffet restaurant going bankruptcy and maintain their business in a long run.
Sources
1. https://www.businessinsider.com/how-all-you-can-eat-restaurants-make-money-2018-3
2. https://www.theatlantic.com/business/archive/2014/12/the-economists-who-studied-all-you-can-eat-buffets/384033/
3. https://onlinelibrary.wiley.com/doi/epdf/10.1111/joss.12117?referrer_access_token=OQs0jto-pXxsK4YKwgjeBIta6bR2k8jH0KrdpFOxC66NV1LCGPLrBHYg2f0l1-RcYYGpGf3xLDVn6maPgKPqcayCsRoZ1DQj3O91k4C6X1W7wkw65WB88824tkaGqmQV
Images
1. https://nextshark-vxdsockgvw3ki.stackpathdns.com/wp-content/uploads/2014/12/seafood_buffet.jpg

Comments

  1. AnonymousFebruary 4, 2019 at 8:56 AM

    This reminds me of a social experiment I learned about that was conducted by VICE. A man created fake reviews for a restaurant that didn't exist and had a reservation back log of multiple months. Everyone's anticipations were high and when they finally got the call in to go to a restaurant that didn't exist they were beyond excited. Vice took it a step further and transformed this man's back yard into a gourmet restaurant, yet the food was microwave ravioli. It looked good, but it was cheap. Would people notice? No, they did not... they loved it.

    ReplyDelete
    Replies
    1. AnonymousFebruary 13, 2019 at 11:38 AM

      Yes, same with me! I also watched something similar with burgers. They took average cheeseburgers and sold them at a gourmet burger place. Without knowing how much the burger cost, the people ate them and gave their honest opinions. When asked what they thought of their meals, all of the customers were happy and enjoyed the food. They were then told that their burger was actually made from a small, local burger shop. The customers were stunned, assuming the burgers were gourmet just by the restaurant. These people also didn't notice the difference, which shows the effect of pricing and advertisement.

      Delete
  2. AnonymousFebruary 8, 2019 at 9:22 AM

    In the first textbook reading, there was a section about all you can eat buffets, which explained why someone who is a light eater, would eat much more than usual at a buffet. The reason behind this was that, like you mentioned, they want to eat their money's worth and more so they feel like they got really cheap food. However, this comes at a cost because at a certain point, we no longer feel good about the food we eating and this is when the marginal cost exceeds the marginal benefit of continuing to eat.

    ReplyDelete
  3. Anny T.February 10, 2019 at 12:07 AM

    It is an interesting gamble that these buffet restaurants take when they open their doors. These restaurants bet on the fact that people will be unable to to eat the amount of food worth the amount they paid for. From the consumer perspective, people are drawn towards these restaurants thinking they can out-eat the amount they paid for, when in reality this probably isn't true (because if so, then how do buffet restaurants make profit!). It is almost a psychological gamble between the producers and the consumers. Restaurants are hoping that the opportunity cost of not exploding and forfeiting the consumption more food comes to the mind of their consumers so they are more likely to make money!
    (https://www.mashed.com/118542/can-eat-buffets-really-make-money/)

    ReplyDelete
  4. AnonymousFebruary 18, 2019 at 9:05 PM

    Interesting post, Emily! I didn't know that the price of a buffet actually affected the consumers' perceptions of the food—I thought that consumers would prefer cheaply priced buffets over pricier ones. I found that many all-you-can-eat restaurants have to resort to some strategic tactics to maintain a profit margin while keeping their prices reasonable. For example, they serve the cheaper, more filling items like potatoes or pasta at the beginning to deter customers from eating more of the expensive items. They also use larger spoons for cheap items, and serve the higher quality items in smaller plates or portion sizes. This way, people will gravitate towards eating the cheaper foods, saving money for the restaurant!

    Source: https://www.marketplace.org/2014/06/09/business/ive-always-wondered/how-do-restaurants-set-their-buffet-prices

    ReplyDelete

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