The New Yorker recently published an illuminating story exposing the odd psychological factors that contribute to lobster pricing. The crustacean is regarded as—and marketed by restaurants as if it were—a luxury good, yet huge lobster harvests (believed to be a result of global warming) have glutted the market, resulting in prices as low as $2.20 a pound off the boat.
“There’s more lobster out there right now than anyone knows what to do with, but we’re still paying for it as if it were a rare delicacy,” points out New Yorker correspondent James Surowiecki. So why are we willing to pay so much money for a food that is overabundant and incredibly cheap at wholesale price?
The first straightforward reason that restaurants aren’t marking down lobster prices is the inherent uncertainty of prices from year to year: “if a bad harvest next summer sent prices soaring, restaurants might find it hard to sell expensive lobster to customers who’d got used to cheap lobster.” The deeper reason, though, is that the price of lobster involves a ton of odd psychological factors.
“There’s more lobster out there right now than anyone knows what to do with, but we’re still paying for it as if it were a rare delicacy,” points out New Yorker correspondent James Surowiecki.
Back in the day in Colonial New England, lobster was seen as a low-class food because it was so abundant. Servants used to poo poo at the bug-like crustacean, insisting that they not be fed lobster more than three times a week. Lobster became incredibly popular in the 19th century, which lead to overharvesting, which lead to depleted supplies, which eventually lead to a price hike and resulting popularity among the wealthy. “In the process, high prices became an important part of lobster’s image. And, as with many luxury goods, expense is closely linked to enjoyment.”
Furthermore, restaurants worry about the message that discounting sends, since it’s scientifically proven that “when people can’t objectively evaluate a product before they buy it (as is the case with a meal) they often assume a correlation between price and quality.” Cutting the price of lobster on a menu might signal that the lobster is inferior in quality. Also, if you keep lobster prices high, that less expensive sesame-crusted tuna looks like a good buy, comparatively.
Setting lobster prices, then, is a complex attempt to both respond to and shape what customers want. But this is only possible because, as Surowiecki astutely states, “restaurants are not a commodities market, and restaurants can add value to the lobster they serve with unique recipes, décor, dockside location, and so on.” Commodity producers, on the other hand—like the lobstermen in Maine—can make boatloads of money if the market conditions are good, but their fate ultimately depends on the broader economy. “Restaurants are trying to insulate themselves from the market; lobstermen are at the mercy of it.”
[via The New Yorker]