Can someone explain this economic paradox?

I suspect that they’re loss leader products.

Yes, but wouldn’t that mean that I would still be able to order the cheeseburger – cheese, or spicy chicken nuggets – spicy. Why am I paying LESS for a product that has more labor put into it (putting the cheese on the burger\shaking the spice on the nuggets)

They adjust prices to adjust sales figures. It’s not always strictly rational by cost.

I’m with @the100thmonkey on this.

I know when I stop into Mickey D’s on Tuesdays to get my son a $1.99 happy meal (OMFG, how cheap is that?!?!) I’m probably not going to go hungry myself. I’m going to get something. Now, because I’m smart, I get myself a two-buck happy meal as well. Many other people get a $5 big mac meal, and feel like they’ve come out ahead because they saved money on the happy meal. Good for them.

Yes… we’re not submersed in the advertising here, so he doesn’t even feel he’s missing out on anything. But they do have a tradition here of ‘lørdag gotteri’ (saturday candy). about 20kr worth of treats to eat over the weekend. And I couldn’t take that away. It does give a good excuse to say no to candy during the week though… ‘Hey..none of that. It’s not Saturday.’

I got lured into this discussion under false pretence. This is NOT a question of economics. It’s a simple question of marketing tactics and pricing policies by fast food companies. (in my opinion are neither fast NOR food…) so semantics… it’s all semantics.

If you go there for their 99 cent cheeseburgers and realize you also want a soda, fries, and some chicken nuggets to go with that, they’ve made their money back on the cheeseburger. It’s like when my local supermarket sold 18 lb turkeys before Thanksgiving for $4 a piece. It was a hook to lure people in because they’d surely buy something else – probably a lot of other things – to go with the turkey. They lose a little money on each turkey but in the end come out ahead.

This absolutely is a question of economics. Marketing tactics, pricing policies – they are all driven by economics.

And isn’t the more interesting question of economics and fast food restaurants how they can sell any meal period for just a buck or two? Definitely makes you wonder what you’re getting, eh?

Marketing tactics, pricing policies – they are all driven by….. mmmm… I wouldn’t say economics… that’s too broad a term. I’d say, business marketing. GOSh… there I go again.. semantics.

The McDouble has one slice of cheese. $1

The Double Cheese Burger has two slices of cheese. Paying 30 cents more for that extra slice.
$1.30

When they added lead to gasoline they charged more for it. When they took the lead out they charged more again.

For lunch occasionally my cheapskate friend and I would go to McD and get a double cheeseburger for $0.99. Since he was on a low carb diet he would take one of the patties and all the onions and I’d eat the remaining cheeseburger.
Somehow it tasted twice as good.

Yeah maybe there is a more specific term for what I am trying to say. I’m not a business person at all. What I meant was that profit is the primary driver behind every single decision a for-profit company, like a fast food chain, makes. In the end, it is all about making money and their decisions, as illogical as they may appear up front, have very logical, calculated perhaps even complex reasoning behind them.

Yes but no one has answered why will they not allow you to order the realistically cheaper product for the same price. If a spicey chicken nugget is listed at $.99, shoulden’t the regular nugget be as well, or atleast allow one to order chicken nuggets spicy hold the spice. Same concept with the cheeseburger.

Does it have to do with specilization of labor? Persons would have to shift their focus and expend energy thinking in order to make a cheeseburger without cheese since majority of the people order cheeseburgers?

They can’t “hold the spice”. It’s not prepared right there in the kitchen. They rip open a plastic bag, and dump the frozen, pre-cooked, pre spiced nuggets in the deep fryer to defrost them.

Giving you non-spiced product instead of spiced product would eff up their inventory printouts.

@Seek_Kolinahr

But that’s the exact problem. The inventory printouts cause a man-made economic inefficiency. Due to this rigid structure the product that cost less to produce ends up more expensive, simply because the “computer says so” Management should use common sense and either price the products the same, or manually give you the non-spiceys for $.99

You’re assuming it costs less to produce. I probably doesn’t, or doesn’t enough to make much different. I think you’re going to have to trust my experience in cost accounting.

@cazzie

How can something WITH spice cost less than something WITHOUT spice? They are BOTH nuggets. Plus since Wendys has already been producing standard nuggets they would have to retool their factory to add spice. How would cost accounting make this cheaper.

Math lesson:

TN = total price of nuggets
TS = total price of spicy nuggets
N=price of chicken and all other nugget paraphernalia
S=price of spice and all other spice related paraphernalia

TN = N
TS = N + S

Since both N and S are never non-zero negative N+S > S holds true for all N\S.

The burger is an even easier thing to discredit since the entire unit is made on site all the technician has to do is NOT pick up the slice of cheese and continue making the burger.

The point here is IT DOES NOT HAVE TO COST LESS.They don’t care if they take a small hit on spicy nuggets if it means that overall their sales figures soar. As @Seek_Kolinahr already explained, the spicy nuggets are mass-produced not fresh. It would cost them a lot more in time and labor to try to de-spice the spicy nuggets. Perhaps the factory produced a huge surplus of spicy nuggets and they need to get rid of them before they all go bad and it is a total loss. Then it would make perfect sense to price the spicy nuggets lower than the plain ones so they can unload them faster. You are seeing only a sliver of what goes into their decision making process. It isn’t fair that you criticize their logic based on the little that you and I know here.

in perfect competition price is pushed down to marginal cost. But the market for spicy nuggets isn’t perfect, so we shouldn’t assume their price to equal marginal cost.

My hunch, promote a new menu item with lower temporary prices. Then adjust price to reflect demand.

Plus it’s not like they’re losing money on the spiceys. They’re just making a smaller profit than they are on the regulars. They’re willing to decrease their profits by forty cents or so in order to be able to advertise:

SPICY CHICKEN NUGGETS 99 CENTS!!!!!

More alluring than:

UNSEASONED CHICKEN NUGGETS 99 CENTS!!!!!

Ok I get the point on the nuggets only because they are shipped from the factory as two physically different products, but how can you explain the cheeseburger phenomenon where the unit is assembled on site?

The cost of the tiny amount of spice or piece of cheese is inconsequential. The advertising, labour, transport, power… THESE are the real costs. Especially the advertising and marketing.

Some products are sold as ‘loss leaders’... it’s to get the punters in to spend money on other things. They take a unit loss because they know, statistically, they’ll make it up in other things. ‘You want fries with that?’ or ‘What would you like to drink with that, sir?’ They are going to sell you things to re-coop the cost/loss of the cheese or the whatever.

I had a friend who managed a McD’s. They had x many products assembled and read to go and marked with markers when the product was made, and it had a ‘shelf life’ of so many hours. If they didnt’ sell, they were waste. It was up to the manager to anticipate and balance ready made to keep the waiting down, but not create waste. Each place is a franchise too. Which means the individual owners pay a fee to McD’s or BK or what ever, and they buy their supplies and sell the stuff and pay their own bills and try to make a profit. McD’s or BK set the specials and pricing and provide the posters, promotional items.. etc. as part of the franchise fee.

These places don’t work on ‘cost of product’ principal like a regular restaurant would. It’s marketing.

If you want to know more, I bet you could go in and TALK to a local owner or manager.

Haven’t got time to read the other answers, but I suspect this is supply and demand in an imperfect market.

In a perfect market, price will drop to marginal cost. So, since it costs more to make a spicy nugget, the price will be higher.

However, here, maybe competition for regular nuggets is low and demand for them is higher so the price can be higher.

Try going to McDeathalds and asking for a Cheeseburger, hold the cheese. My guess is, they will give you the cheeseburger price, not the hamburger price.

It’s retarded, and the workers don’t tend to know or care and their policy is probably to avoid arguments with customers anyway.

If you think you’re getting a deal, you are more likely to go there. They are getting your money for their cruddy food, unless you choose not to buy anything from them. That’s been my plan for a long long time. What will I do with all the money I save and all the health I don’t contaminate?

I think of it like WalMart – WalMart has a shit-ton of products.

Say you need tupperware for an outdoor barbeque picnic. Walmart can sell you a whole set for $3. Why? Because you’re going to pass the $2 flip flops, the $5 beach towel, the $15 bathing suit, the $10 sunglasses, the $20 “value pack” of sunscreen, and the $12 set of sandbox toys on the way to the tupperware. By the time you get to the register, you’re spending $70, and still thanking them for giving you such a good deal on the tupperware! And why not? The grocery store wants $15 for the same set.

@Seek_Kolinahr YOU get it! Gold metal to you and a bunch of flowers too!

I’ve often wondered about the lower price of Wendy’s spicy nuggets myself but I’ve shrugged it off. Then I noticed that Checkers had their spicy chicken sandwich on sale for 2 for $2. The regular chicken sandwich is not on sale,,,,just the spicy. Something else has to be going on here. My theory is that the chicken meat producers have a lower quality of meat available that doesn’t quite meat the normal market standards. This lower quality meat doesn’t taste as good so it is not suitable to sell. Maybe the lower quality meat has a bad aftertaste or maybe it just tastes bland or not too yummy. They cover up the taste with spice, the less desirable flavor is no longer noticeable, and WHALA , something that was going to have to be wasted can be sold to the public. I don’t have any idea whether this is true or not. Does it make sense?

Is it possible that people who order spicy chicken are more likely to buy drinks to neutralize the spice? Non-spicy chicken eaters can drink water.
Drinks and fries are the big profit items.