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Tuesday, August 20, 2013

Why Lobster Prices Don't Fall During Lobster Gluts

Interesting article in New Yorker this week: http://www.newyorker.com/talk/financial/2013/08/26/130826ta_talk_surowiecki

We're in a lobster glut right now -- lobstermen have too many to sell; apparently it's down to $2.20 a pound in some parts of Maine (we just saw it at $3.99 a pound in Portland).  So why don't restaurants lower their prices?

- Keeping them expensive makes other menu items look like better deals

- Customers often associate higher prices with better quality; if lobsters were cheaper they'd be suspicious.

- Restaurants can capitalize on falling prices by adding lobster-themed dishes without lowering prices of lobsters.

- Danger that people will get used to lower prices (and one time, lobster meat was food for lower classes, not upper).  It was only when it became scarce for a while that rich people realized it was a delicacy.

He ends the article by noting that commodity producers -- like lobstermen -- are at the mercy of the market, whereas businesses like restaurants try to insulate themselves from the market.

For me, it's one more reason not to eat lobster.  

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