Variable prices for fast food blamed on volume, cost, discrimination

By September 24, 2013 Audio, Community, WYSU No Comments
While a Big Mac at a McDonald’s in Cortland tastes the same as one from Hubbard, it’ll cost you more. Experts say, sometimes, it boils down to the commonly used concept of price discrimination. Jessica Mowchan/TheNewsOutlet.org

By KAREN BELL
TheNewsOutlet.org

 

While a Big Mac at a McDonald’s in Cortland tastes the same as one from Hubbard, it’ll cost you more. Experts say, sometimes, it boils down to the commonly used concept of price discrimination. Jessica Mowchan/TheNewsOutlet.org

While a Big Mac at a McDonald’s in Cortland tastes the same as one from Hubbard, it’ll cost you more. Experts say, sometimes, it boils down to the commonly used concept of price discrimination. Jessica Mowchan/TheNewsOutlet.org

If you’re taking a bite out of a Big Mac in Cortland, it’s taking a bigger bite out of your wallet than if you’d bought it in Hubbard.

The Hubbard McDonald’s charges $3.39 for a single Big Mac. That same sandwich costs $3.95 in Cortland. The ones at the McDonald’s on Fifth Avenue in Youngstown are $3.59, which is the average price for the sandwich.

The same concept is true despite the food item or the fast food chain.

Blame it on price discrimination, said Tod Porter, the chairman of the Economics Department at Youngstown State University.

“Almost all businesses use price discrimination to one extent or another,” said Porter.

For example, the price for plane tickets to the same location is different depending on the day of travel.

“When people vacation, they are looking to save money. For the average businessman flying in the middle of the week, no matter the price, he is going to buy a plane ticket,” said Porter.

There are many factors that go into setting a price for a product.

In the case of the Big Mac, the McDonald’s corporation gives franchisees a suggested range of prices for menu items. It’s up to the franchise owner to determine the final price. Only 15 percent of all McDonald’s restaurants are corporately owned.

Volume plays another part. Generally, the busier the store, the cheaper the burgers will be and the longer the lines.

Audience is another factor, said Frank Sole, professor of business management at YSU.

“One thing businesses look at is ‘who is their audience,’ and they tailor accordingly,” said Sole.

Some consumers are more “cost sensitive” than others, said Porter. Certain age groups are more willing to spend the time clipping coupons. These are the people who are motivated by price.

“Businesses will make coupons for items they believe people, who spend the time to coupon, will purchase at a lower rate,” said Porter.

For instance, grandparents might clip coupons for kids’ meals to treat their grandchildren. Other age groups would rather save time than money. Students, for example.

“I feel like if the lines are long then I might just go to the one that’s more expensive,” said Angelina Brown of Salem, a fashion design student at YSU.

In general, business owners are looking to make the most from their investments. They cover costs first. Then they consider such aspects as volume and audience.

Not all decisions are this easy to explain. Sometimes, even the experts don’t know the exact reasoning behind pricing.

When asked about the science of pricing, Sole explained it by licking his finger, sticking it in the air and smiling.

Sometimes, it just seems to come out of thin air.

Big_Mac_graphic-WEB

TheNewsOutlet.org is a collaborative effort among the Youngstown State University journalism program, The University of Akron and professional media outlets including, WYSU-FM Radio and The Vindicator (Youngstown), The Beacon Journal and Rubber City Radio (Akron).