July 14, 2004
Pricing schemes

The New York Times has an interesting article on a phenomenon that I have to admit I have NOT noticed, namely a trend toward lower prices for wines at restaurants. I've always felt that wine pricing was one of the cruelest inequities (iniquities?) in the universe, so it's nice to see that things are changing, at least a bit.

There's no discussion of the economics of this pricing scheme and not much about whence the high prices originated, but it's not just a matter of having a captive audience. If the desire to drink wine in a restaurant is more highly correlated with disposable income levels than the desire to eat food in a restaurant, then the most profitable pricing scheme should reduce the food prices at the expense of the wine prices. I guess what I'm saying is that economic theory tells us this will be a short trend...

Posted by Paul at July 14, 2004 3:50 PM | TrackBack Print-friendly version

I've always thought that wine pricing was outrageous, but a recent Chowhound discussion convinced me that it's not that unreasonable to mark up 3 or 4 times retail. Restaurants don't get the volume discounts of stores. They have to pay to store the wine. Glassware is expensive and easily broken. Taking the fall on spoiled bottles also eats into their bottom line. Top places also have to hire someone to handle the wines.

As someone pointed out, no one complains about a huge mark up on a simply salad. Maybe it's because wine prices climb so quickly.

I'll have to read the article, though. The restaurant of a local wine shop here in New Orleans sell glasses of wine for $1.50 and beers for 75.

Posted by Todd on July 14, 2004 at 4:19 PM

You type very well for someone who has access to $1.50 wine and 75 beer. Of course, it is only 4:30.

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