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Article 4 The Economists Who Studied All-You-Can-Eat Buffets (The Atlantic, 27 Dec 2014)4 Buffets are now...

Article 4
The Economists Who Studied All-You-Can-Eat Buffets (The Atlantic, 27 Dec 2014)4

Buffets are now big businesses, particularly in Las Vegas. The buffets in Vegas are no longer the dollar bargains they once were in the late 1950s. They're fancy productions with Kobe beef and king crab legs that can cost over $50.

New research shows that paying that much for a buffet might actually make the food taste better. Three researchers did an all you can eat (AYCE) buffet field experiment to test whether the cost of an AYCE buffet affected how much diners enjoyed it. They conducted their research at an Italian AYCE buffet in New York, and over the course of two weeks 139 participants were either offered a flier for $8 buffet or a $4 buffet (both had the same food). Those who paid $8 rated the pizza 11 percent tastier than those who paid $4. Moreover, the latter group suffered from greater diminishing returns—each additional slice of pizza tasted worse than that of the $8 group.

Source: https://www.theatlantic.com/business/archive/2014/12/the-economists-who-studied-all-you-can-eat-buffets/384033/

Question:

With reference to Article 4, explain why “The more pizza people ate, the less they enjoyed it”.

Solutions

Expert Solution

Cornell economist David Just and Brian Wansink exercised a field experiment on diners paying a flat rate for lunch. Just and Wansink enlisted 66 people who were on their way to an all-you-can-eat restaurant that was serving a pizza buffet. They allowed half of the participants pay the regular price, $5.98, for the buffet, and gave half their subjects a coupon for 50 percent off.Without the knowledge of diners, their pizza intake was monitored by their waiters and analyzed by Just and Wansink.

Just and Wansink founded an unexpected correlation between price and consumption. They wrote,“Because a customer faces no marginal cost to consumption,Conventional utility maximization implies that he or she should continue to eat until the marginal utility of consumption reaches 0. Economic models of consumer behavior generally assume that utility of consumption is unaffected by the price paid.But the two groups were constantly eating different amounts of pizza with people who has paid full-price eating, on average, 31.77 percent more than the group that has paid half (4.1 slices versus 2.9). Just and Wansink say this depicts “sunk cost fallacy”: Although the money is been spent—the cost is “sunk”—consumers are irrationally trying to “make up” the sunk cost.

After their meals when Just and Wansink surveyed customers on how much they’d enjoyed their pizza, they found a negative correlation between taste and consumption: The more pizza people ate, the less they enjoyed it.

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