My friends and I recently discovered a shocking price change on the menu at the Tavern of Northfield. The breakfast special had been raised from $4 to $4.75. On the track team, going to the Tavern is sort of a ritual. Members on the team go almost every week and they always order the same thing — the breakfast special. The meal comes with two eggs, bacon, and a side of toast, which people on the team unanimously agree is a pretty good bargain. So, after hearing about the price change I immediately wondered if we would still go to the tavern as often to buy the breakfast special. Put in economic terms, what is our price elasticity for this meal?
One important consideration is the other substitutes for the breakfast special available in Northfield. As far as I know, there are no other restaurants in town that offer the high quality breakfast food that the tavern does. Restaurants like Chapati and Hogan Brothers are good, but they are not really substitutes for a breakfast meal because they serve and indian food and hoagies. Tandem Bagels comes closer to being a substitute, considering that some enjoy eating bagels for breakfast and could potentially pick it over the tavern. Yet, it is still does not offer the same traditional breakfast meal — bacon, eggs, and toast — that the tavern does. Moreover, Tandem Bagels is relatively more expensive to start with, so it seems unlikely that a price increase of 75 cents at the tavern would cause someone to choose Tandem bagels instead.
Ultimately, I think it is unlikely that the price increase at the tavern will cause the track team to go there any less. Going there has become a tradition and the dining experience is somewhat irreplaceable. Even though it’s kind of goofy, team members have a special attachment to the restaurant and the breakfast special. As a result, their price elasticity for the meal is relatively low.
More broadly, this example sheds light on how tradition can affect price elasticity. As is the case with the track team and the breakfast special, there are some things that have people weird and irrational affinities for and are unlikely to give it up if they have to pay more. I wonder to what extent firms consider the idea tradition in their decisions on pricing.
I didn’t know y’all went so often. If it is that big of a tradition I agree that a $0.75 increase wouldn’t change the tradition, though it may add up after a season of trips there. Your team breakfast seems very price inelastic. However, if you’re interested Tandem has two for one on Tuesdays after 2 P.M. and I personally prefer Tandem to the Tavern so if that is of interest it’s an option!
Let me first begin by stating that the $0.75 hike in price hurts my very soul. More importantly, it makes me sad that the tavern special is no longer embolden in red. I too had to question my loyalty to the Tavern, and it seems that it will continue until graduation as my choice for a Saturday morning breakfast.
I also agree that your team’s choice on the Tavern breakfast is price inelastic. Generally, a jump from $4 to $4.75 is not a huge gap or a significant portion of your income. Your argument that you cannot really find any good substitutes strengthens your claim that the breakfast special is price inelastic. I am wondering how your teammates would have reacted if the price increased to $6. I want to know your price elasticity then because a $2 increase is not a huge increase but the price of the product has gone up by 50%, which seems a lot to me. Will your team’s tradition still have influence on your team’s price elasticity?
Like the other comments, I would also agree that Tavern breakfast is price inelastic. Although $0.75 is almost a twenty percent increase, it is not such a large portion of the consumers’ income that they will not mind spending the little bit of extra money to eat the same meal they ate before for $4.00. That being said, as a senior who has experienced the glory that is a four dollar Tavern breakfast on multiple occasions, I think it is straying away a bit from a tradition with my friends too.
When it comes to substitutes, I really think Northfield should have other options for breakfast. If you consider a bagel as something that could be eaten any time of the day with all the options Tandem has to offer from the pizza bagel to the lochs/cream cheese combination, etc., a bagel from Tandem could be eaten at any time of the day. With this logic, the Tavern has a monopoly over the dine-in options in Northfield for purely breakfast food (eggs, bacon, french toast, etc.). Especially on those Sunday mornings when the earliest food available on campus is brunch in the dining hall, there is no other option but to go to the Tavern for a now priced $4.75 Tavern Special.