Pricing Chicken Wings

Photo: J Wynia

I stopped by a local fried chicken joint, Harold’s Chicken Shack, the other day.  Just to give you a sense of what sort of restaurant this is, there is a layer of bulletproof glass separating the workers and the customers.  They don’t cook the chicken until you order, so I had five or ten minutes to kill waiting for my food.

One of the items on the menu is a chicken wing dinner.  With each dinner, you get a fixed amount of french fries and coleslaw.

The two-wing meal costs $3.03.  The three-wing meal costs $4.50.

Since the only difference between the two meals is one extra wing, that third wing is costing the customer $1.47.  I thought this was interesting, because if each of the first two wings were priced at $1.47 each, then the implied price of the French fries and coleslaw is a combined 9 cents.  So it seems like Harold’s is implicitly charging more for the third wing than for the first two wings, which is unusual since firms generally give quantity discounts.

I read further down the menu:

2-wing meal $3.03

3-wing meal $4.50

4-wing meal $5.40

5-wing meal $5.95

The four- and five-wing meal prices are more in line with how firms usually price.

So what do you think Harold’s charges for a six-wing meal?  Here’s the answer:

2-wing meal $3.03

3-wing meal $4.50

4-wing meal $5.40

5-wing meal $5.95

6-wing meal $7.00

Definitely most bizarre.  When economists see things that don’t make any sense, we can’t help but think of some story that rationalizes the seemingly odd behavior.  Maybe Harold’s prices the 6-wing meal high because it is worried about obesity?  Not likely, since every item on the menu is fried.  Is the sixth wing especially big or tasty?  Is demand by people who order six wings more inelastic?

Perhaps some clues could be found in the pricing of other items.  Fried perch are sold in a similar fashion to fried chicken, with the choice of two, three, or four piece meals (again with french fries and cole slaw).  Here is how perch is priced:

2-piece perch meal:  $3.58

3-piece perch meal: $4.69

4-piece perch meal: $6.45

So you get that third piece of perch cheap, but they nail you on the fourth piece.  This certainly hints at Harold’s thinking there is some logic to this sort of pricing.

Ultimately, though, my guess is that the person who chose these prices was just confused.  One thing I have realized as I have worked more with businesses is that they are from the idealized profit maximizing automatons of economic theory.  Confusion is endemic to firms.  After all, firms are made up of people, and if people are confused most of the time by economics, why wouldn’t that carry over to firms?

 


Steve Nations

This is similar to the banana lady issue that was posted several weeks ago. There I argued that she was just not being rational, much as Mr. Levitt is doing here.

By the way, should you really talk about the bulletproof glass, and then in the next sentence mention that you have time to "kill"?

Matt

They might be matching promotions at other places?

Cameron

Rather than speculating, maybe you should ask the owners or managers at Harold's about the pricing structure. There may be a rationale that doesn't fit the business econ model you allude to above.

nottom

While I can't explain the odd pricing on the 2-3 piece meals, I'd imagine that there is a bit of inelasticity for the largest sized meal as a lot of people are just going going to order the largest size and not really pay attention to if they are getting a good value or not.

There is a somewhat interesting parallel in the pricing of Burger King's BK Stacker hamburgers. You can get either a single, double or triple burger for $1,$2, or $3 but you can get better value by just buying multiple singles as this gets you extra buns, bacon and cheese than the double or triple versions.

John G

mmmmmm....chicken

Cal F

Agree with the first comment. Certain meal combos are just more popular, so you can charge more for those while having some lower priced options on the board just to make you think the place is cheap overall (people aren't coming in usually to analyze the menu; they know what size they want). Nobody orders the 2-piece meal in this day and age, particularly the average wing joint customer. It is like going to an appliance store and seeing a brand name model for really cheap, and then another model of the same brand-name that is really expensive. If there is a model of the same well-known brand in the "middle" somewhere (not arithmetic average middle), you tend to go for it even if the difference between the prices don't follow a rhyme or reason. You think, hey, I saved money from the expensive one but am getting a better quality than the cheap one. I'm hungry for wings now.

CM

Is the 6-piece the biggest available? I would guess that the pricing structure is set up to take advantage of the "I want the biggest size available" mentality, taking advantage of customers' eyes being bigger than than their stomachs (probably a common phenomenon in a chicken wing joint). As for the 3-piece costing more than the 2-piece, it might be that 2 wings is not enough to constitute a "meal" in most customers' minds, and the decreased demand resulted in a decreased price.

MT

two thoughts:
1) what's the final price including tax in Chicago? It seems like the store you describe operates with cash most of the time. Maybe the owner is more worried about having change that anything else.
2) To discourage arbitrage: the probability that a 6-wing order was done by 2 consumers is much higher than the same prob for a 5-wing order.

WholeMealOfFood

Burger King has all sorts of crazy pricing. Not only are anomalies like Gary Temple mentions. Even right now, look at the pricing of their single, double, and triple Stackers, which are priced at $1, $2, and $3, respectively. Because the only things that increase are the patties and cheese (and the cheese only increases for the triple). So, you can get more food by ordering 3 singles than by ordering the triple for the same price. It's like a stupid tax on fat people.

Wingin it

Why $3.03 instead of $3.00 or $3.05 for the two piece, I am guessing Harold doesn't spend alot of time drawing marginal revenue and marginal cost curves to study the effect of supply and demand on his profitability.

Gallego

I remember a similar thing a year or so ago, when they decided to changed pointing system in Formula One racing. The first draft, not the one they actually use now, also had such irregularity in marginal pointing; first place was 25 points, second 20, third 16 and so on with margins decreasing, but at some further positions the difference jumped one point higher (maybe two points difference between 6th and 7th, and three points between 7th and 8th, or something like that). Unlike chicken wings prices this one cannot be explained by popularity of particular position...

Jay

If there is a logic being used in the pricing, my guess is that it has to do w/ the size of the fryers and how many wings/fish can be fried at one time in a fryer. If they have to use 2 fryers for your order it might take them longer to fulfill another order.

Charlie

I could understand if there was a premium for each increase to an even number - to try and collect a 'premi-yum' for 2 splittting a meal, as in the perch meals. But this wouldnt account for the wing meals...

Pop

It can make sense to us if we have more information. First of all we can still assume that the restaurant wants to maximize the profit.

Secondly as long as the pricing make sense to majority of customers that is good enough to allow the customer to feel right. The reason is that the concept of marginal cost analysis is not the standard way of thinking to people that need to buy something quick like what economists always think that all reasonable human would always do. Most people believe in the average cost analysis. From the price list we can see that the average price per wing is decreasing (2pcs: $1.515/pc, 3pcs: $1.5/pc, 4pcs: $1.35, 5pcs: $1.19/pc, 6pcs: 1.1667/pc)

Thirdly, people decide to buy the amount of wings that they love to eat regardless of the price as long as the pricing are all right to them (from the 2nd analysis).
In general I think 6 wings is the right portion for the average and above average (size) americans. I would guess that 6 wings is quite popular and the store want to make more profit than the lower than the average American. I call this a "Price Discrimination". (Large size people concern less about the price [less elasticity demand at the amount they love to eat] than those of the tiny people)

Forthly, it is possible that the larger the box/container the, cost per wing is higher.

That's why I think it makes sense to me. (If we try to understand)

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Cañada Kid

Being a wing fan, I think I can see what Harold's is trying to do. Especially with pizza, I rather buy the larger option if I am torn between two or three sizes. I feel like I get to eat all I want to during the meal and then get leftovers for lunch the next day. If I am unsure whether to buy the large or medium sized meal, I don't even think of the price difference (even though I should): I almost always go with the large. If many other consumers think like I do, Harold's would be making a very economic decision.

dickens

One guess is that the meal with a larger number of wings is very popular with customers (like families) who don't look at smaller dinners. Also possible that the six-wing dinner comes with a heaping quantity of french fries that's significantly out-of-proportion with those served with a smaller dinner.

And speaking of business sense, what's the local McDonald's charging for the comparable meal (possibly priced to compete with other fast food joints)?

Steve

Have you thought about the fryers? If they cook after you order, each order will take up one fryer. You have to be able to keep the orders separate if you are cooking them to order. The extra piece, either cod or wings, may necessitate the use of a second fryer, making the operation bog down.

Sam

This is not limited to small wing joints. I saw a commercial for Burger King's new bacon burger. They charge $1 for a 1 patty bacon burger, $2 for a 2 patty burger, and $3 for 3 a 3 patty burger. If you buy 3 one patty burgers, you get 2 extra buns, more bacon and probably more cheese than the person who buys the 3 patty burger. Who would ever buy a double or triple?

Dave

All this speculation is fun, but did you ask them why the price is like that? Maybe they need some math help1 :)