Video: Wendy’s Dynamic Pricing

Wendy’s recently announced that they were going to follow in the footsteps of businesses like rideshare apps in that they would start charging more for burgers during peak hours.

  • They call it dynamic pricing: known as surge pricing with Uber.
    • Maybe they should call it “splurge” pricing.
  • Airlines also charge more during peak travel times.
  • However, due to backlash on social media, Wendy’s has backed down.
  • PM: I think Wendy’s is confusing the laws of supply and demand.
    • If there is not enough supply of a product or service to satisfy a surge in demand then prices necessarily go up.
    • Higher prices are the cue to suppliers to increase supply.
      • For industries where supply can’t be quickly increased prices can remain higher for some time.
    • For instance, with Uber, if there is greater demand during certain times, higher prices might be needed to entice more Uber drivers out of their homes or make it worthwhile for one that is further away to come and pick you up.
    • For airlines, they’re not going to buy a bunch more planes during peak holiday season so prices remain high during those periods.
    • However, I can’t see Wendy’s running short of burgers during lunch and dinner time.
    • Some have used movies as an example where certain days or times of the day it’s cheaper to go to the movies.
      • But they don’t raise prices on those packed Friday nights.
    • Similarly, restaurants will offer deals during slower times of the day or week in order to entice customers to help off-set some of the fixed costs.