The Economics of Buffets: From Loss Leaders to Variety

Buffets originated as cheap and easy food options provided by casinos to keep gamblers gambling. However, today's buffets have transformed into extravagant displays of variety and exotic cuisines. Buffet pricing models utilize flat-rate pricing, charging a set price for unlimited consumption. This model takes advantage of low marginal costs and economies of scale, allowing buffets to offer a wide range of food without significantly increasing costs. Buffets also demonstrate cross-subsidization, where those who eat less subsidize those who eat more. Economists have identified biases, such as the sunk cost fallacy and framing bias, that contribute to the allure of flat-rate pricing. Additionally, buffets offer consumers the appeal of variety and cater to the human craving for different choices. The buffet experience can teach us economic concepts such as adverse selection, utility maximization, and convex preferences, emphasizing the importance of optimizing personal satisfaction rather than eating for the sake of getting one's money's worth.