Friday, April 24, 2009

Some Weird Pricing (continued)

In a blog more than a month ago, I had noted of some weird pricing at KFC and my failure at explaining it. As a last resort, I have consulted the ultimate Economics detective, who has solved many such puzzles in his columns at the Financial Times. Here's his take:
I have two explanations, neither is that convincing:
1) The owner is innumerate
2) The owner has designed a "confusion pricing" plan designed to extract more revenue from careless customers. This is surprisingly common (see "The Undercover Economist", chapter two) but his scheme is being undermined by his own staff, who automatically figure out the cheapest price for you. Just a thought.
I do agree with Tim that either answer is very convincing, but if I had to choose one, I guess I would probably go with the second. I'll also ask a couple of behavioral economist friends from grad school on what they think as well; will post another entry if anything interesting comes up.

7 comments:

Anonymous said...

Emre,

It could be a clever way of "humanising" the KFC staff.
You enter in a conspiracy with them against "the big boss" to get a better deal.
You come away thinking how helpful the staff are and become a loyal customer.

Emre Deliveli said...

Great comment:) Could have been a plausible explanation. The only problem is that they don't usually tell the customer they are giving them a better deal unless the customer specifically asks why they paid TRY 13 for 5 pieces rather than the published price of TRY 13.50. Also, it seems the cashiers are doing this out of their own accord, as those new to the job do not know the trick....

Anonymous said...

I think that the pricing is designed to encourage customers to order 1 more piece than they otherwise would have ordered. For example:



1. Enter the store with view to ordering 3 pieces.

2. Price list tells you this would cost 8.25 TL.

3. Decide to order 4 pieces at 10.00 TL, as 4th piece would cost just 1.75 TL.

Emre Deliveli said...

Sure, but many people can simply ignore to see that the fourth piece is just TRY 1.75...Normally, you'd think that the fourth piece is TRY 3. Why not write on the menu the price of 4 pieces as 10?

Mustafa said...
This comment has been removed by the author.
Mustafa said...

Another interesting pricing scheme:

TİŞÖRTTry explaining this one :)

Emre Deliveli said...

That's what's known as the "laz pricing scheme", laz being the inhabitants of the lovely Turkish Black Sea port city of Trabzon, also known with its sucker of a football team.