C. Jarrett Dieterle is a legal policy fellow at the Manhattan Institute.
On his way to winning the New York mayoral race, Zohran Mamdani announced his “Game Over Greed” campaign calling on FIFA to reverse its dynamic pricing strategy for World Cup tickets. Mamdani’s outrage over the sale of tickets that fluctuate in price based on demand no doubt stems in part from his soccer fandom, but it also fits with his larger democratic socialist brand.
C. Jarrett Dieterle is a legal policy fellow at the Manhattan Institute.
On his way to winning the New York mayoral race, Zohran Mamdani announced his “Game Over Greed” campaign calling on FIFA to reverse its dynamic pricing strategy for World Cup tickets. Mamdani’s outrage over the sale of tickets that fluctuate in price based on demand no doubt stems in part from his soccer fandom, but it also fits with his larger democratic socialist brand.
Food is another interest of Mamdani’s, and he has economic thoughts on that front too. In late September, the New York Times described how he “built a campaign around food,” frequently highlighting lesser-known New York City eateries and airing his gripes about “halalflation.” Mamdani’s anti-dynamic pricing ire may soon be targeted at restaurants — with an assist from a City Council bill.
But New York’s bill is just one of many such laws being pushed by progressive lawmakers around the country to prohibit dynamic pricing in restaurants. Instead of trusting the market and discerning customers, states and cities are considering policies that could end up hurting both restaurants and diners.
In New York state, Democratic lawmakers in Albany have pushed their own dynamic pricing bans for food, and Vermont legislators have sought to prohibit businesses from using electronic shelf labels or dynamic pricing.
The way these bills are drafted largely exempts longtime restaurant industry traditions such as happy hour but it raises the question: Is it necessarily more problematic if a restaurant utilizes real-time, demand-based dynamic pricing versus more traditional forms of dynamic pricing?
Off the bat, it’s worth noting many restaurants and bars already do engage in informal versions of real-time dynamic pricing with concepts such as “power hour” in which, during slower parts of the night, bartenders will spontaneously feature cheap “well” drinks or discounted shots. Beyond these historical examples, the evidence from restaurants that are implementing these more sophisticated dynamic pricing strategies suggests that the practice is largely unremarkable and just as likely to lead to cheaper dining.
For instance, the high-end British restaurant Bob Bob Ricard employs a more complex time-based model for dynamic pricing that extends beyond just a daily happy hour by offering 25 percent off for a la carte menu options during “off-peak” hours. Rachel’s Kitchen, a chain in Las Vegas, has utilized a form of real-time dynamic pricing, sometimes adjusting prices by 10 to 15 percent per hour — with little in the way of pushback from customers, according to the restaurant. Kotipizza, a popular pizza chain in Finland, uses algorithmic pricing to adjust delivery (but not food) prices for its pizza, with delivery fees fluctuating from $3.35 to $9.13 — hardly unusual charges in today’s delivery-oriented economy.
What’s often lost in the scaremongering are the inherent limitations on the strategy when it comes to food. That’s because the purchase-making point for restaurant customers differs from those in many other industries. Your typical diner mostly makes his or her dining decision in a two-step process: Deciding to go out to eat at a restaurant and then deciding what to order once there.
In other words, once you walk into Wendy’s, it’s unlikely that a price fluctuation would deter you from ordering entirely — especially if you’re in the mood for a Frosty — so much as it might alter what food you order (maybe skip the side of fries). The result? A begrudging order and the phrase every business owner dreads: customer dissatisfaction.
In other businesses, such as the airline industry, price fluctuations can often be the difference in a traveler making a trip in the first place during a certain time of year; in restaurants, customers have largely made the decision to eat somewhere already and don’t want a dollop of discontent served alongside their burger.
That’s why dynamic pricing fluctuations — especially in the form of price increases — are usually relatively modest (in the range of 10 to 15 percent) at restaurants that employ the strategy. It’s also why more basic time-based pricing strategies such as happy hour, dropping the price, are often a safer bet for many dining establishments.
Regardless of what pricing model a restaurant chooses, the business ultimately has a customer base to answer to. In today’s world, customers have an unprecedented number of alternatives available if they become annoyed with sudden price spikes. If they’ve already walked in the door, they might stay and order anyway. But they probably won’t come back.
In the end, the market — not politicians — can provide the best natural check against restaurant surge pricing. Mamdani and his progressive allies would do well to remember this before they try to convert his Game Over Greed campaign into a restaurant regulation own goal.
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