At Aiello’s Italian Restaurant, mid-way between Syracuse and Binghamton NY, researchers observed behavior at an all-you-can-eat buffet. Their goal was to determine how price affects taste.
Our Goal? To look at some marginal pizza analysis.
Please imagine the scene during a typical weekday lunch buffet. At the buffet table, diners could eat as much as they wanted of the pizza, soup, salad, breadsticks and pasta. Entering, they were just asked to fill in a short survey and given one of two fliers. While both fliers said they would get a free beverage, one indicated lunch was $4 and the other said $8. With no further indication of price inside, no one was aware that some patrons were paying more than others. After the meal, they had a follow-up questionnaire that included rating what they ate on a 9-point scale.
And this where it gets interesting.
People who paid less enjoyed themselves less. Not only did they give the food a lower rating but also, as they ate more pizza, its appeal declined more rapidly than for the diners who paid $8.
The researchers concluded that price has a sensory effect. When people think they are getting a bargain meal, because they assume it will not taste very good, it doesn’t.
This takes us to the extra slices of pizza and a little known, fascinating economist.
Our Bottom Line: Marginal Utility
More of us should remember economist Alfred Marshall (1842-1924). A professor at Bristol and Cambridge, he was the scholar who encouraged us to think at the margin. Marshall saw that extras matter because their value varies. Because the wage for one extra worker might be less than the extra revenue she generates, we would not want to hire her. When we decide to sleep an extra 15 minutes, we usually compare the marginal benefit (the pleasure) to the marginal cost (no time for breakfast).
Similarly, at a luncheon buffet, rating the taste of subsequent slices of pizza, we are focusing on the satisfaction–or “utils” as an economist might say– from each extra slice. Called diminishing marginal utility, the pleasure of each extra unit of consumption tends to decrease. As a result, we enjoy the first slice of pizza more than the third one.