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The Planet Money Thanksgiving feast explores the economic mystery of why turkey prices go down despite high demand. They discuss countercyclical pricing theories, home production's impact on the economy, and seating challenges. They also delve into matching theory for optimal seating arrangements and reveal the secret ingredient in cranberry sauce.
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Quick takeaways
- Even though turkey demand is high during the holidays, the price of turkeys actually goes down due to countercyclical pricing, driven by competition among supermarkets.
- Home production, which is not included in GDP, represents a significant portion of the economy, and quantifying it provides a more comprehensive understanding of economic activity.
Deep dives
The Mystery of Thanksgiving Turkey Pricing
During the holiday season, the price of turkeys goes down, even though turkey demand is high. While supermarkets pay higher wholesale prices, consumers pay lower prices. This countercyclical pricing phenomenon is observed in other products as well, such as champagne, canned tuna, avocados, ice cream, and soup. One theory suggests that supermarkets use turkeys as loss leaders to attract customers. Another theory suggests that price-sensitive consumers drive down prices. However, a new theory states that the increase in the number of supermarkets selling turkeys during the holidays creates competition, leading to lower prices.
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