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'Capacity and Competition' At Heart Of Pricing Issue

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A $20.99 lobster dinner in Stonington prompts Matthew Yglesias to ponder the mystery of why restaurant prices for lobster dishes remain high when the market cost of their main ingredient is so low, for a piece in Slate. "Instead, the lobstermen’s pain is leading to windfall profits for restaurant owners, fueling dark talk of price fixing in some quarters." Yglesias says the issue is "a basic one of capacity and competition." Fisherman's Friend, where he enjoyed his lobster, is the only such place in town. In Blue Hill, he discovers a place that despite high prices for lobster rolls, is packed.

But when I went to Fishnet, parking spaces were scarce, the line was long, and it was a bit of a struggle to find a picnic table to eat at. In other words, even radically lower prices would do little to increase sales, simply because the restaurant lacks the capacity to serve many more customers.
Unfortunately for restaurant patrons, "the market price scheme does work in reverse." When lobster prices rise, you'll be paying more.

· The Mystery Of The Market Price [Slate]

[Fisherman's Friend Photo: TripAdvisor]