Tuesday, May 21, 2024

Marginal Pricing And McDonald's


When each consumer pays the most they are willing to pay, you have an optimized economy - in theory.

We went to a funeral in Atlanta last week (more on that in another posting) and after picking up the Dowager Widow, we stopped at the McDonald's in Darien to get breakfast.  I went inside to use the kiosk and was shocked to see that every breakfast sandwich was over $5.  Not for the "value meal" but just the sandwich.  Five bucks for a goddamn McMuffin!

The people in the drive-through were all paying that, too.  The drive-through window and the inside menu promote the "value meals" which in many cases were over $10 for a sandwich, hash browns, and a coffee.  Ten bucks!  For fast-food!

The reason I went inside was to use the kiosk as they have a "deals" section there and lo and behold, you could get a sausage McMuffin with hash browns for $2.79 or about half what they wanted for the sandwich alone on the main menu.. So I ordered three and we all ate for $9.04 or what the guy in the jacked truck idling in the drive-thru was paying for just one "meal."

I was willing to explore and take my time and got a better price.  Of course, this was without coffee, but we already had coffee.  For some weird reason, Americans have gotten used to the idea that a cup of coffee, which was basically free at one time, is now worth $2.50 or more (often far more) just for a basic brew.  At the Georgian Terrace hotel, regular coffee is $6 a cup at the restaurant.  When did this happen and why did we go along with this travesty?

Oh, right.  Starbucks.  Sold us the idea that coffee should be expensive, when it was once a cheap staple.

But I digress.

The guy in the drive-thru is late for work and just orders "whatever" because he is in a hurry and is suffering from low blood sugar. So he pays "whatever" and maybe grouses about high prices but doesn't do anything about them.  For example, making meals at home is less than half the price of eating out, as I noted before.  The only reason we didn't do that as well was that we were leaving on a week-long trip and the refrigerator was empty.  And $2.79 wasn't going to break the budget, particularly in comparison to the nightly rate at the hotel we were staying at.

What breaks the bank is when you go through the drive-through every day and are hungry and end up over-eating and over-paying for bad food.  When a restaurant becomes your kitchen, bad things happen.  But then again, I am lucky I have someone in my life who cooks.  I just do the dishes.

But speaking of hungry, the folks at Ambetter sent me the video above.  As part of the My Health Pays program, you watch these short videos or read pdf files about healthy practices and in exchange, they credit a debit card with cash.  I use this to pay our cell phone and hotspot bills.

What is odd about these tutorials is that so few of them are about exercising and eating right or other things we traditionally think of as "healthy" habits.  Rather, a lot of them deal with mental health and emotional issues and a whole helluva lot deal with spending, saving, and money.  Funny thing, but if you are broke and in debt you end up unhappy and this leads to stress which leads to health issues.

I know this as the two major health issues I have had (so far) were stress-related.  Crank up the stress levels and my gout or diverticulitis goes nuts.  Since retiring, both have abated.  Funny how that works.

The above video talks about HALT - Hungry, Angry, Lonely, Tired - the four factors that can cause you to impulse-buy something you don't really want or need.  I wrote before how car salesmen use these factors - keeping you at the dealer for hours (five or more!) until you are, well, Hungry, Angry, Lonely and TiredHaving a meltdown at the car dealer isn't some aberration, it is how they sell cars.

You reach a point where your blood sugar is low and you are tired and you lose it - lashing out at the car salesman.  But instead of leaving, you end up buying the car, partly out of embarrassment and partly to "show them who's boss!"  Sounds stupid, but people do it - we all do it.  It is a game they play with a stacked deck and you can't win - which is why buying a car from an individual seller is often a better deal - unless they try to play the same games as well.

So while the "invisible hand" of the marketplace works in theory, and each consumer pays the best price they can afford for a product ("a car for every purse and purpose") in reality, emotions skew the whole deal.  And fast-food places have learned, since the pandemic, that there is little point in engaging in a price war, when you have hungry customers who no longer know how to prepare their own meals and are demanding food - now.  Just charge them as much as you dare and chances are, despite all the bitching and moaning, they'll pay.

And on the app or kiosk, you hide a daily "deal" that few will bite on, other than cheapskates like me, so you can cover your ass and say you have affordable options for the less-fortunate.

Until people stop acting emotionally and start acting rationally, nothing will change.