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If we paid more attention to the nuances of our everyday lives, we would all be going crazier than we already are. Did you ever go to a restaurant that serves lobster and think carefuly about what the menu is saying? I was at a wonderful Italian place in Newport a few weeks ago when I finally did so myself. As I considered the items on the menu, I was deciding among the $12.95 gnocchi, the $24.95 filet or the lobster, which was listed at “market price.” Why the heck does lobster not have a static price listed? Now, this would not that interesting a question to many of you, particularly if you understand why it’s bad that the government is allowed to print money, in that the price of lobster changes rapidly – as costs and demand change rapidly for that particular foodstuff. However, if we accept this and are wiling to pay the “market price” for a lobster,then what kind of prices are the gnocchi and filet selling for? “Non-market” prices? You Keynesians out there will just say that this is evidence that transactions costs give rise to sticky prices and that there are no such things as market prices- but I am not buying it. Do gnocchi costs and demand not change rapidly – perhaps, but I don’t believe that is also true for filet? Why aren’t filet’s listed at “market prices”? They are, after all, “luxury” foodstuffs, just like lobster – so why are they treated differently? I welcome your ideas on this one …

3 Responses to “What Exactly is a “Market Price?””

  1. Jason says:

    Perhaps “Market Price” is just a phrase to hide the higher price of lobster from the consumer. Or it could also be possible that the gnocchi and filet have an inelastic demand curve, so the restaurant can assume that whatever changes occur in their supply, the true market price won’t change enough to warrant the cost and trouble of printing new menus with an updated price.

  2. Harry says:

    In my memory it’s always been that way, and I’ve always wondered why other expensive ingredients that fluctuate in price are not similarly adjustable. My guess is that it was the result of a doctoral thesis at the Cornell Hotel School. It became doctrine, and remains unquestioned among the food and entertainment community.

    Today, with word processing, there is no excuse for it. I can understand not printing precise prices in the days when the menus were printed once every two years, but even then you always got a mimeographed sheet which included the specials of the day.

    There used to be a restaurant in Quakertown called Trainer’s, where you could get Maine lobsters ranging from 1 pound to 3 or more, and there they would quote you the price for each, depending on the stuffing.

    Then again, I’ve been in restaurants where they give you menus with no prices, or give the man the only menu with prices, so if you happen to be taking Gloria Steinem to dinner, she is spared the embarassment of ordering the Beluga caviar and the lobster stuffed with lump blue claw crabmeat.

    Another explanation is that everybody expects the lobster to be embarassingly expensive, so when the restaurateur gets a $3 per pound truckload of lobsters, he can pretend the lobsters cost him $15 per pound. But that still does not explain why filet mignon does not work the same way. And as long as we are talking about food and entertainment, why a ticket to a Barbra Streisand concert is not quoted as “market price” where the price is not revealed until one reaches the ticket window.

    Now, colleges dodge this by publishing the market price, at least for the coming year, and then discount the price depending on whether your kid falls into a favorable category. If restaurants worked this way, one would never know what the meal would cost until you had filled out an application listing not only your attackable assets but also whether your dining companions had any attackable assets, particularly if it were a family meal. At The Four Seasons, a happy meal would be listed at $150 ($65 on the luncheon menu).

  3. Rod says:

    The problem is that the diner does not know the market price and probably does not know where to find it. It’s kind of like the pink sheets for a penny stock price — the last spot trade in a thin market.

    At most lobster pounds in Maine, they post the market price per pound right there above the lobster tank. If they serve lobster dinners, that price includes a baked potato and a salad. Like all restaurants, they get you on the drinks, which they hope will cost as much as the lobster!

    The real lobster market in Maine is currently depressed, and lobstermen have to decide whether it’s worth the diesel fuel to set and haul traps. One can get a really good deal by buying the lobsters directly off the boat, but that has to be done on the sly for fear of retaliation by other lobstermen who sell wholesale through a co-op.

    The lobster fishery in Maine has actually grown considerably over the past several decades without depletion of the lobster population. Lobstermen are very conservation-oriented and would not want to over-fish the lobsters. First of all, there’s a size limit on Maine lobsters at about three pounds (they measure the size of the lobster’s carapace to determine whether a lobster is over or under the limit). Next, they don’t take any females with eggs on the underside of their tails — they cut a notch in their tail fins and thus mark them as “V-notchers” that identify them as breeding females. Those practices ensure that there are plenty of little lobsters, which then find shelter from predators in the spaces between the many small round stones that lie under Maine waters. The finite number of hiding places thus limits the number of small lobsters that will survive infancy and crawl into lobster pots.

    Incidentally, while lobster pots are designed to trap lobsters, many lobsters swim in and out of those traps, so the ones hauled into the boat are just the ones who happen to be in there when the pots are hauled.

    Other states have less restrictive regulations than Maine. Those lobster boats on the Discovery Channel operate off the coast of Cape Cod and can take lobsters over three pounds. Same for Nova Scotia: the Canadians help drive the market price of lobsters down by selling cheap to US supermarket chains. There are also a lot of lobsters to be found in deep water: word has it that the edge of the Baltimore Canyon is home to zillions of lobsters that crawl around like cockroaches. It takes a lot of gumption, however, to haul a pot from 600 feet or more.

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