Opinion

Felix Salmon

The gastronomics of bad service

By Felix Salmon
March 16, 2011

My first monthly Gastronomics column is up at NYMag, on the subject of the economics of bad service. Why are restaurants which do the best job of maximizing discomfort, inconvenience, and noise also the ones which are the most popular? My theory is that it’s all about signaling: that if restaurants succeed at manufacturing crowds and long waits, people reckon that the place must be good, otherwise everybody else would never put up with such things. And so they become self-fulfilling.

There’s a lot more other stuff to cover in this space, so do let me know if you’re in the restaurant/bar business and are happy talking about matters financial and economic. Or if you have any questions which have been niggling at you about the way that these places make money.

Update: Via Eater, Steve Plotnicki explains the downside of foisting bad service on your customers.

Comments
6 comments so far | RSS Comments RSS

Yogi said it first: No one comes here anymore. It’s too crowded.

Posted by RZ0 | Report as abusive
 

Very true, and there’s actually been a decent body of research work on how this works in inter-personal relationships too. Prof. Bob Sutton has a good roundup here, “Brilliant but Cruel”:
http://bobsutton.typepad.com/my_weblog/2 006/08/brilliant_but_c.html

Posted by petewarden | Report as abusive
 

Neat article, but (trying to remember 1st-year econ) I guess I don’t see how people wasting time waiting for a table is an externality–both the cost (the time wasted) and the benefit (the restaurant is always full and doesn’t need to wait for customers) are borne by parties to the transaction. Maybe it’s an “inefficiency” (since the diners’ lost time is more valuable than the restaurants’ opportunity cost of an empty table), but I don’t see how it affects anyone external.

If the restaurant made people wait outside, which led the people to (a) annoy the neighbors or (b) buy coffee at the nearby coffee stand while they waited, *those* would be externalities, no?

Posted by acarlon | Report as abusive
 

I also don’t think that’s an externality; it’s closer to rent seeking, if you’re looking for a fancy economics word to plug in to the article at that point.

The signaling story seems right to me, but I’d raise the possibility that these places can get away with bad service because they’re so popular — that maybe they’d be more popular with better service, but on some level there’s no point in improving the service if you’re always sold out anyway. (Why not raise the prices? There you might have to resort to the signaling story.)

I’d be interested to know how much a typical $10-$40 per entree restaurant in New York spends on food vs. labor vs. rent vs. other, but I’m not sure you would get that compelling (to other people) a column out of it.

Posted by dWj | Report as abusive
 

Gary Becker beat you to this. No Nobel Prize for you!

http://research.chicagobooth.edu/economy  /research/articles/67.pdf

Posted by Eric_H | Report as abusive
 

Throw “bad food” into the mix of “maximizing discomfort, inconvenience, and noise” and I suspect it won’t remain popular for long–even with the ‘in-crowd.’

Posted by Samdog_07 | Report as abusive
 

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