Sunday, March 10, 2024

Should restaurants let menu prices "surge?"

 When demand increases, shouldn't price be allowed to rise? (WSJ)

Dynamic pricing—charging higher rates at peak times and dropping them at slower ones—has become commonplace in industries such as e-commerce, and mobile apps have made it easier for companies to study consumers’ buying and browsing and quickly adapt. Rising costs in recent years have led more retailers to implement it.
Restaurants are experimenting with the technology as the industry looks for ways to boost sales and increase profits. Many restaurants increased menu prices as labor, food and other costs have soared since 2021. Prices for food eaten away from home in January were 30% higher than in the same month in 2019, according to Labor Department data.

If prices cannot rise shortages will develop, and profits will fall, which will reduce the number of sellers (supply), further exacerbating the shortage. 

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