Trivial Pursuits

A Wendy’s restaurant in Rutherford New Jersey. (Photo by Kena Betancur/VIEWpress)

A silly internet controversy (redundant, I know) recently erupted after Wendy’s CEO Kirk Tanner announced that the U.S. hamburger chain would experiment with “dynamic pricing” at some of its locations. For those unfamiliar, “dynamic pricing” simply means that, instead of remaining constant, a product’s price will occasionally change to reflect consumer demand—higher/lower prices in times of higher/lower demand. When Wendy’s plan was first announced, my immediate reaction was one of amused curiosity at the thought of cheap, off-peak burgers. But as news filtered down through the interwebs, populist outrage ensued. Leading the charge was Sen. Elizabeth Warren, who decried Wendy’s “price gouging” on Twitter. She was quickly outdone by her Senate colleague Bob Casey, who—in what must surely be the first ever official congressional letter to use the term “Baconator”—not only questioned the company’s “predatory and greedy” pricing plans but also demanded that Wendy’s answer a long list of questions about its business strategies.

As is often the case, Wendy’s quickly responded to these and other hysterics by clarifying that it wouldn’t soon be implementing burger surge pricing (or whatever) but would still try to increase pricing flexibility in the future. Now that the company is, happily I’m sure, out of the politicians’ crosshairs and back to selling (mediocre) hamburgers, we can all laugh at the entire mess. What we shouldn’t laugh at, however, is policymakers’ ever-increasing attention to meaningless stuff and the broader dangers this trend poses to the U.S. economy and the quality of federal governance.

Actually, Dynamic Pricing Is Good (and Common)

As my Cato colleague Ryan Bourne patiently explained last week, dynamic pricing—by conveying information to market participants and “smoothing consumption”—can benefit producers and consumers, even in places like restaurants that can’t (unlike ridesharing apps and their armies of price-sensitive drivers) immediately boost supply when consumer demand spikes and prices rise. In restaurants’ case, many consumers will avoid peak hours to enjoy lower prices during slower periods. Those that remain, meanwhile, will see better service—shorter lines, fresher food, cleaner facilities—during rush hour because there are now fewer people in the establishment. This can even mean lower prices overall, as compared to a fixed-price environment:

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