Friday, 23 October 2015

Why We'd Be Better Off If Restaurants Charged Us To Reserve A Table

Restaurants should charge for booking a table at peak times as well as for eating the meal. I'm telling you this not just because I want to tell you something interesting which you may not have considered, but also because what I'm now going to say serves to explain well the economic concept of value, and why we would all be better off if restaurants charged for booking a table at peak times.

It's obvious to everyone that the laws of supply and demand factor in to the dining out experience. A 6pm booking on a Tuesday night at a restaurant that has been open for 10 years is bound to be in much lower demand than a 7:30pm booking on a Saturday night at a restaurant that has only been open a few weeks. That is why taking bookings on a first come first serve basis distorts the true signals of value.

A couple that phones up and books a table at random or a few friends who walk past and grab a table on a whim may not value their table as much as people that would have paid an extra surcharge to eat in there. Consequently, charging for table bookings increases the chances that the people who most value a dining experience have that experience, while at the same time leaving room for less discerning people to choose other restaurants. Plus, if non-price sensitive people pay more at peak times, price-sensitive people should find cheaper meals of the same quality at non-peak times.

So why, then, don't restaurants charge for booking a table? It could be for the same reason that hugely popular concert tickets don't sell for more. But it's probably also the case that popular individual restaurants that adopted this policy unilaterally would place themselves at a disadvantage against other popular restaurants that chose not to charge a booking fee. In all likelihood, this is why reservations do not have the kind of prices that would allocate diners with restaurants more optimally, and create extra societal value in doing so.