Denny’s breakfast menu in Provo, Utah, offers something that combines demand-based and cost-based price discrimination, but it’s neither.
The “French toast slam” is two pieces of toast and two eggs, two strips of bacon and two sausages for $6.99. The “senior French toast slam” is one piece of toast and one egg, and two strips of bacon or two sausages for $5.49, and you must be at least 55 years old to buy this.
You pay 20 percent less and get half as much; but why restrict it to older people? Denny’s cost saving on the senior slam is probably less than 20 percent. Perhaps the demand elasticity of the 55-plus is higher than that of the younger set, so that explains the price difference as demand-based. Some seniors would prefer the smaller meal and happily pay as much or even more for it, rather than purchase the regular Slam where they would feel compelled to eat everything.
Does Denny’s understand behavioral economics? Why do they charge seniors less? Why this unusual pricing scheme?
Tuesday, September 29, 2009
What Does Denny's Know That Economists Don't?
The Senior Slam: