
The vast influence of Gary Becker - jseliger
http://www.vox.com/2014/5/4/5682066/the-vast-influence-of-gary-becker
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ableal
_" His paper "A Note on Restaurant Pricing and Other Examples of Social
Influence on Price" seeks to explain why popular restaurants with long waiting
times for tables don't simply raise prices until the market clears. These kind
of applications of economic research methods to the dilemmas of everyday life
have become increasingly popular over the years in both academic work and
popular journalism, and the spirit of such inquiries all goes back to
Becker."_

That first phrase intrigued me, and I scanned the PDF linked (
[http://www.unc.edu/~fbaum/teaching/PLSC541_Fall06/Becker%20J...](http://www.unc.edu/~fbaum/teaching/PLSC541_Fall06/Becker%20JPE%201991.pdf)).
Possibly the key is this:

 _" Formally, I propose that the demand for a good by a person depends
positively on the aggregate quantity demanded of the good."_

(The figure that goes with this, on page 4, for the resulting price/demand
curve, is worth a look.)

~~~
mseebach
But, in that case, couldn't the increased price serve as social signaling? Why
is a line out the door a better signal than a "Surge pricing: 2x" sign in the
same door?

~~~
DavidWoof
First, you don't get to choose your signalling. Anyone can double their prices
and put a sign in the door, why would the public trust that? More importantly,
if you raise prices to lower demand, the public will _accurately_ see that as
lowered demand. If you're nothing special at a doubled price, then you're
nothing special.

I'll admit though, I think Becker is mostly wrong here. One reason restaurants
don't triple their prices to clear excess is fear that the public would call
it "gouging" and react extremely negatively, thus eliminating any chance of
long-term success. Also, there's a huge difference between a hot new
restaurant and the restaurant that has lines out the door every day for years,
a difference Becker ignores.

I find a lot of "popular" Becker is like this, especially the famed work on
discrimination. Brilliant math, genuine insights, but skips over essential
variables when reaching his conclusions, making the final result dubious.

