A Kosher Compromise

In Brussels, two neighborhood restaurants were only open for lunch, and still both restaurants lost money because they couldn’t cover their fixed costs. Members of the Lubavitcher Hasidic group came to both owners and offered the following: make one restaurant dairy only, the other meat only (to abide by religious requirements), and we will make your restaurants profitable at dinner, and your lunch business will improve too. The owners agreed-and lo and behold, lunch business boomed, and the restaurants were full at dinner too. Clearly, there had been an excess demand for kosher restaurants in the area; and the increased demand at dinner spilled over into the related market at lunch. Resources that had stood idle (at dinner time) were now being utilized. A clear Pareto improvement.