Behavioral Economics and the Bread basket.

black-forest-country-bread

It's unlikely you would pay even a small sum for me. And that makes me sad.

By Ezra Klein

I’m with Ben Miller and Frank Bruni: Restaurants should charge for bread. As Bruni argues, there’s no such thing as “free bread.” Rather, there’s such a thing as “slightly more expensive entrees.” And that’s the thing people are getting when they think they’re getting free bread.

That might all be fine if the amount of bread people were receiving corresponded to the amount of people who would actually pay the marginal cost of a baguette and some butter. But that’s almost certainly not the case. Things that are considered “free” are not treated rationally. A nice experimental demonstration of this was relayed in Dan Ariely’s book Predictably Irrational: The Hidden Forces That Shape Our Decisions. A few years ago, Amazon introduced “Free!” Super Saver Shipping. The deal was simple: By $25 worth of merchandise, save $3.99 in shipping. Sales shot up worldwide as consumers bought a bit more merchandise to qualify for free shipping.

Except in France.

When Amazon investigated the anomaly, they found that their French division had not offered actually “free” shipping. They were charging a single franc. The equivalent of twenty cents. Amazon removed the minor charge and sales in France shot up to match the rest of the world. Twenty cents had almost destroyed the program.

Ariely conducted a similar experiment himself. He set up shop in a mall and offered shoppers one of two deals. Either they could have a free $10 certificate (which is to say, a free $10), or they could pay $7 for a $20 certificate (which is to say, a free $13). Literally everyone chose the first. But when Ariely made the $10 certificate cost a single dollar, two-thirds of the folks he stopped preferred to pay for the $20 certificate.

What does this have to do with bread? In short, people consume a lot more of something when they think it’s free. Even attaching a marginal cost to the bread bowl — a quarter, say, or a dollar — would probably lead consumption to plummet. That would make everything else on the menu cheaper and, incidentally, make dining out a bit healthier as people wouldn’t overconsume bread. It’s not just that the bread eaters are being subsidized by the bread refuseniks right now. It’s that everyone is wired to eat more of the bread because they think they’re getting something free.

14 responses to “Behavioral Economics and the Bread basket.

  1. But I *like* bread

  2. So buy it!

  3. I will offer the perspective of someone living in Houston who has eaten at plenty of different Tex-Mex places. Simply put, the way it works there is that restaurants are very much judged by the quality of the free salsa and chips they serve (with refills even!), and they often do take the place of ordering an appetizer. There have been restaurants that do (or did) charge for chips and salsa. Typically, they end up reversing the policy or they simply endure the fact that the first thing people will say about them is that they charge for chips and salsa.

    One key takeaway is to note that quality is an issue so a restaurant with free chips and salsa will have an advantage and will get people buying entrees and margaritas.

  4. "more naan and chutney, we are starving, and cant wait for our main courses!"

    there are still restaurants and diners where several, big silver buckets, filled with sour pickles and saurkraut , another with cole slaw are put on the table, along with a big basket of rolls and breadsticks, when you sit down.
    one hardly needs to order anything else.
    not long ago, i went to a reasonably priced mexican restaurant ,and they brought big bowls of freshly made guacamole , filled with huge chunks of avocado…..when the price of avocados are quite high in the markets. it was such a delicacy, we couldnt resist asking for refills.
    another restaurant always brings beautiful bread with generous refills of a whipped pesto dip and tomato dip.
    one could build a meal around these condiments with bread, and the restaurants that provide these offerings, are all moderately priced.
    they add a lot to the pleasantness of dining in these places.

  5. Without having read “Predictably Irrational,” your comparison of effects seems potentially faulty. Amazon shoppers bought more FROM AMAZON. Without a control group, we don’t know whether these purchasers would have indeed bought those same items at their local brick and mortar in refusal to pay for shipping (which would actually make them rational). If there is a control group, I apologize for bringing this up.

    Consumers don’t really have a choice as it stands to buy/consume bread at one location then go to a restaurant to consume non-bread-price-inflated entrees. Bread + entree seem irreversibly tied (economically speaking) with the average consumers ignorance as to what composes the price of their meal. And you’d have to prove this makes economic sense to decouple the too for a restaurant to ever do this, as ~$0.50-$1.00 are not affecting people’s meal decisions as much as they improve the restaurants profitability.

    While I agree that it would be awesome to have the option of not having bread included in my meal price if I don’t want the bread being offered, your supporting evidence (as paraphrased) is faulty.

  6. If I ran a restaurant and had housemade bread of which I was proud, I’d take a middle route:

    Offer bread when diners sit. Let them enjoy it. Then if they ask for more, inform them that the bread is indeed a speciality item, that diners are provided some courtesy of management, that we’re glad they enjoyed it, and that we hope they understand there will be a reasonable $3 charge for additional servings.

    When they agree, bring them a nice large serving of more fine bread and seasoned dipping oil. This way you have happy customers and aren’t just giving away more bread.

  7. Speaking as a food restaurant wanker, that is, the more money I spend at a restaurant, the higher I rate the food, if I was not given free bread, I know I would consider that restaurant to be lower class.

  8. Pingback: Bread, Chips, and Naan « The Internet Food Association

  9. Pingback: Fitful Murmurs » Blog Archive » In Defense of Free Bread.

  10. This is a cold and pitiless dogma, Klein. I suppose restaurants should also charge for serving water and placing spoons on the table. And hotels should charge for towels and hot water. And there should be an extra fee to use the popular machines at the gym. And my grandma should make us pay $0.50 for a glass of lemonade.

    Is a world that efficient one that you’d really want to live in every day?

  11. Pingback: Should you have to pay for restaurant reservations? « The Internet Food Association

  12. Now apply this finding to preventive measure and insurance c0-pays.

  13. TANSTAAFL “There Ain’t No Such Thing As A Free Lunch”

    Give me decent service and what I order off the menu and I’ll keep coming back. I’m sick and tired of paying $100 for dinner for two (w/o alcohol) and coming away wondering why I paid for a dinner I could have made better myself for 1/5 the price. Knock off the freebies and serve me something worthy of a professional restaurant.

    Oh, good draft beer is also a must.

  14. Pingback: Bread, Chips, and Naan | kashwaynepromotion.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s