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[flagged] Why do ten Chicken McNuggets cost the same as twenty? (randomdirections.com)
195 points by tfaod on June 28, 2015 | hide | past | web | favorite | 172 comments



Just letting everyone know, by clicking anywhere on their page, you've now liked their Facebook page.

This was done via ClickJacking and here are the offending scripts/html:

<script>$(function(){var i=-1;$("#cksl7").hover(function(){i=$(this).closest("#v").attr("qjid");},function(){i=-1;});$(window).focus();$(window).blur(function(){document.getElementById("v").style.visibility="hidden";});});$(window).focus()</script>

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You can unlike their page here: https://www.facebook.com/randomdirectionsblog


Is this even legal? Isn't a like supposed to be performed by a human (and owner of the liking account)?


What's "legal" is determined by Federal, state, and local code. I can't imagine there are any laws against this kind of thing.

It almost certainly violates Facebook's ToS though.


Meta: what is HN policy on flagging? Is this a reason to?


Thanks. This is one of the reasons I always read the comments before the article on HN.


Wow, extremely scummy. I'm surprised more people aren't angry about this.


Because not everybody uses FB (I don't), or when they do, use a private/incognito window, "sandbox" the session, to avoid being tracked (that is how I use GMail).

I can't be the only one that does this, it takes almost no effort, and using a private window for the really "important" accounts, so you're not logged into them all the time, prevents a whole lot of problems and exploits.


Agreed Important to note that by default even in incognito window all sessions in that window (at least in chrome) are persisted. For example closing and opening tabs will resume last session) so this exploit may still work if you have Facebook open in the same incognito browser I've used plugins that further guaranteed a new session between tabs in incognito


Shouldn't this set off some alert at Facebook since their likes per visitor rate will be much higher than normal?


That style makes his whole introduction about this not being click-bait to advertise his business look really scummy.


Yup, look at graph of likes spiking in last couple of days: https://www.facebook.com/randomdirectionsblog/likes

The post on the blog itself is a month old.


That is true if you [1] have a Facebook account, [2] are logged in, and [3] have JavaScript enabled. None of which are true for me, but I wonder for how much of the Web-using population it is.


I would guess the majority of Facebook's userbase. Most people don't globally disable JS (I don't -- this would have gotten me).


I run noscript, but enabled their JS to view the charts. Luckily I never clicked on the page after that.


I found it interesting that the article didn't mention another explanation: maybe people just don't want to waste food.

Perhaps this dilemma can be viewed as a typical example of classical economic 'homo economicus' vs. behavioral economics theories. Classical economic theory would say any rational human would obviously choose 20 over 10 nuggets for the same price. But behavioral economics typically takes into account other factors that classical models ignore to better explain our seemingly "suboptimal" decisions.

I think maybe 10 nuggets is a reasonable number for one person or two children to eat whereas 20 is obviously too much. In a 'fast food' situation where it's unlikely that leftovers would be saved, people may perhaps be choosing less nuggets to adhere to their very rational believe that (any) food should not go to waste.


That's me actually.

I can buy two gallons of milk at Costco for the price of one gallon at my local store. But I don't buy from Costco because the second gallon always goes bad and I throw it out. Throwing out food feels bad.

Anyway, what do I care about the "free" second gallon if I don't actually drink it?

Edit: hey look, a study:

> A series of experiments demonstrates that consumers exhibit aversion to waste during forward-looking purchase. These experiments further reveal that such behavior is driven by distaste for unused utility, a reaction that is shown to be distinct from an aversion to squandering money. Waste aversion is especially pronounced when consumers anticipate future consequences and deprivation is salient. In addition to demonstrating robustness across consumers and marketing contexts, the results also demonstrate how waste aversion can lead to self-defeating behavior in which consumers forego desired utility.

http://www.sciencedirect.com/science/article/pii/S1057740811...


Even if you weren't worried about the environmental (or other) impact of throwing out food, there is clearly a non-zero cost associated with acquiring a second gallon which you will not drink. You have to carry more stuff home, keep more stuff in your refrigerator, worry about and monitor the state of the milk in the refrigerator, and throw away the milk once it's bad. It is very clearly a worse deal in every way.


Which might work with milk (maybe not), but not with the nuggets you buy at Maccas.


I make yogurt with the second gallon. It feels like magic: I get cheaper milk and cheaper yogurt (free modulo a very modest investment of effort).


Agreed. Pour a gallon of milk in a crock pot, heat it to the Right Temp (I forget what that is), add a teaspoon of regular yogurt (for culture), and then let it sit (I forget at what temperature). It's tremendously simple.


You basically want it a little above body temperature. My crock pot is too hot, even on its lowest setting, so I just use it as a dumb insulated water bath. I heat it to about 45 C, turn it off and let jars of milk/culture sit in the bath overnight.

I also boil the milk and then let it cool to 45 C. This achieves a few things: it kills off any other bacteria that may be in the milk and it denatures the milk protein so that it sets thicker. Costco milk is probably pasteurized at a high enough temperature that this isn't necessary, but I've always done it this way.

Yogurt is really forgiving. I've daydreamed a bit about making a temperature regulator for my crock with an Arduino or similar, but it's honestly not necessary. People get good results simply wrapping a jar with towels.


You can freeze milk, you know!

My chest freezer has probably been the most economical purchase I have made in the past few years. It sips electricity and keeps (almost) everything as fresh as the day I purchased it.


Frozen milk becomes milk fat and off white water. No thanks


Have you actually experienced this personally? Because I freeze milk routinely, and have never had any problems.

Let it thaw completely of course.


>Let it thaw completely of course.

That seems to be the key with any frozen material.

We were worried that our cheese wasn't freezing properly for the first few weeks, until I realized that a 1-2 day de-thaw inside of a refridgerator was necessarry to bring it back to it's true self.


Cream cheese however never returns to its normal self after freezing. It even says so on the package "do not freeze". The flavor is fine, but it becomes crumbly instead of creamy.


Cottage cheese also freezes badly. Hard cheese does fine though.


Try blending it once de-thawed if you're experiencing that.


Skimmed and semi-skimmed milk tends to freeze better than full fat milk.


> Throwing out food feels bad.

I always thought it was a strategy to train your progeny for the next famine / war.

Instead of the abstract advice "By the way, if your grandchildren are even in a middle of a famine, they should remember to eat all the food they can find."

You give a concrete actionable threat "Eat the last nugget, but now!" and wish it get passed down until it's useful.


I've been doing this for 35 years. I don't recommend it :)


> Throwing out food feels bad.

There's a positive side effect where your purchase impacts Costco's sales volume, which impacts their negotiating position with the suppliers, which makes the same product cheaper for everyone else.


You mean, it's better to throw away milk, so you can screw farmers by proxy?


The farmers get to sell more milk.


have to sell more milk.


For an established cow farmer adding additional cows at marginal cost to receive additional revenue is economies of scale. Forcing them to allocate resources to the areas where they don't enjoy economies of scale is likely to raise their cost and not lead to optimal outcome.


> Throwing out food feels bad.

https://en.wikipedia.org/wiki/Loss_aversion


I'm not sure this is exactly loss aversion, but perhaps it's related. I would happily give the second gallon of milk to anyone who wanted it for free. That loss would make me feel better, even though I've still lost the second gallon.


Interesting, this is very observable in the mating selection area.


Yep, I agree here. Sounds like to me the article is trying too hard to sound smart in its "research" and "economics", and consequently fails to make some simpler reasonings, such as perhaps they didn't want to waste food. Or in other words: 20pcs for 6.40 is the REAL pricing, they just offer a smaller portion (making them more profit) for the same amount of money, if you so desire.


I so wish more places would let me get a smaller portion, or opt out of certain things, even at the same price.


Yeah, me too. Some places seem to think that they're doing you a favor by heaping mountains of food on a plate. I'm not a big eater (and yet still eat too much...), and I don't like having to send back a half full plate. Just give me a normal portion already; although I've stopped asking for it, because 90% of restaurants have no clue on how to approximate the size of a 'normal' portion, or the concept of 'balance' (half the amount of pasta with the same amount of sauce - thanks but no thanks).


Seem like the article wanted to explain a few cool concepts in an interesting way.


I don't see how there is a contradiction between homo economicus and behavioral economics theories. If people derive disutility from wasting food, then it's perfectly rational to choose 10 nuggets over 20 if you only plan to eat 10 nuggets.


There is a contradiction, you just chose not to see it. Homo economicus assumes that the utility of the person is reflected in price optimization. If you define utility in a circular way, based on the behavior of real humans, then it will become completely meaningless concept.


>Homo economicus assumes that the utility of the person is reflected in price optimization.

But obviously only price optimization between two identical bundles. It only says we'll pick the lower price between bundles A and B if we have the same valuation of them. You may be confused because often intro econ textbooks assume that the marginal value for something never goes negative. But that assumption is broken here.

Chicken nuggets do not have a consistent per-nugget valuation. When purchased ten at a time, they are more valuable per nugget than when purchased twenty at a time. To such a degree, clearly, that even when the twenty nuggets are costed at a much lower unit price they are less attractive.

There are actual challenges to homo economicus and the assumption of rationality, as in this paradox: http://www.thebigquestions.com/2010/10/12/how-rational-are-y.... But the chicken nugget result is not one of those challenges.


As far as I can tell, the homo economicus model just describes humans as seeking to maximize their own utility function.


If there is disutility in throwing away 10 nuggets, then it is optimal to order only 10, because there is only utility from 10 either way. The article seems to suggest that people's utility is measured in kcal/dollar - which is silly even to the most socially inept economist.


Rather, it becomes "revealed preference theory".


I thought that was part of classical homo economicus. If buying something would cause you some emotional disquiet (because you suspect you're wasting resources), then your willingness to pay for that product is lower, and you won't buy it. So it explains it pretty well. Also, the article mentioned this possibility (that 20 is simply too many) repeatedly.


They also mention (indirectly) that the nuggets themselves are pretty much free. So the cost to McDonalds is the same (largely) for 10 and 20 pieces: labour, energy, rent etc.

I don't think even McDonald's have such good quality control in place that if, say 10 nuggets costs 50 cents, and 20 a dollar, other factors than if people buy 10 or 20 totally dominates the profit.


The article is completely missing an important factor: franchise vs. corporate pricing.

McDonalds has been running national promotions for $5 20-piece McNuggets. While franchise stores aren't always bound to follow national promotions (don't know about the McDonald's franchise agreement), consumer pressure is usually enough to get most franchises to do so.

The phenomenon where the 20-piece costs the same as the 10-piece occurs when the 10-piece was already at or above the price point of the 20-piece promotional price. If it was above, you'll usually see the price adjusted to match the larger quantity promo's price, but rarely see it lowered below.

The franchise will get a rebate against their royalty fees to corporate for the 20-piece, in order to maintain a specific profit level above base food cost. They don't get a rebate against the sale of the 10-piece, so they have no incentive to make it a more attractive offer, as doing so eats into their own margin. National promotions usually have brutally aggressive pricing, particularly if your store is located in a high cost of living area[1].

You'll see slightly different pricing behavior at a corporate store, but only about 18% of McDonald's are corporate ran[2][3].

Now, why McDonald's is choosing to aggressively market 20-piece chicken nuggets is something only they know, but may have something to do with the 40% increase in beef prices recently[4].

[1]: Personal experience managing several different Domino's Pizzas. Many promotions would be ran at break even or below, if it weren't for corporate taking a haircut on their ~10-15% royalty fees. Meaning the margins aren't sustainable for non-promo items. [2]: http://www.aboutmcdonalds.com/mcd/investors/company_profile.... [3]: http://www.pricingforprofit.com/pricing-strategy-blog/strate... [4]: http://www.bloomberg.com/news/articles/2015-01-15/burger-war...


This is the most logical explanation. And considering this line in the article:

With McChicken patties weighing 63 grams and having a better quality of chicken than McNuggets (a meat score of "C-" compared to "D-", according to Calorie Count),

I can't imagine why anyone would want to eat something with a "meat score" of D-. McNuggets always struck me as ground up beaks and claws.


Hard to imagine since in the states at least, mcnuggets are all breast meat. They aren't baloney or sausage.


The 'calorie count' website score is about the healthiness of the meal, not the quality of meat. McNuggets are the same chicken, just with way more breading, and therefore more fat/salt/etc., so 'less healthy'.


Sure, but you aren't eating feet and beaks, just breast meat.


I think this is just a very clever form of price discrimination. In my experience, there are two disjoint groups of McDonald's patrons, those who order off the combo menu and those who order off the dollar menu. The combo menu doesn't have a 20 piece option and the dollar menu doesn't have a 10 piece option. I think this plays into why they are also visually at opposite ends of the display. The people who are looking at the combo menu are far less price conscious to begin with, and an order of 20 nuggets is going to seem overkill of you are working under the assumption that your meal is going to include a drink and a large portion of fries. However, if you are the kind that mentally debates whether you should shell out the extra dollar for a drink, you might be more than willing to forego the fries for an extra portion of protein.

I've found similar tricks are used in vending machines, particularly with the different varieties of crackers. Inevitably, there will be one set near the top of the machine with other expensive items and priced according. However, there is also a half row of ever so slightly different ones further down priced at 2/3 the price.

It's all just a matter of satisfying the demand that exists at lower price levels without having to lower the price for everyone. Setting prices using price elasticity assumes you can only offer a single price to all parties. However, cost-conscious shoppers are already going to spend more mental cycles looking for a good deal. By making the more desirable pricing just a little hard to find, you can give them a better deal without butchering your overall profit margin.


In my experience, ordering a 20pc McNuggets will guarantee having to defrost/fry a new batch of nuggets to fulfill the order. Ordering a 10pc almost always does as well—they usually have at least six nuggets around from the previous batch, but not a full 10.

If the primary cost of the nuggets isn't in the material, but in the equipment-time and labor-time, then it would make sense that 6 would cost less (can often be fulfilled from leftovers), 10 and 20 would cost similarly (require cooking one new batch), and 40 would cost more (requires cooking two new batches serially.)


In Australia 10pc is the largest serving of chicken nuggets you can get at McDonalds, with the other sizes being 3 or 6 (I don't know the prices because they're not listed on their website and I don't often go to McDonalds; https://mcdonalds.com.au/menu/chicken-mcnuggets). Could this be the key though, if 10 is the largest here, then that suggests it is more than what most people can really eat. Having 20 at the same price might just be a decoy to make McDonalds look generous as they'll give you 20 for the same price if you really want (but you don't really want). Might be good value to get 20 if you're sharing but then you'd probably be tempted to get drinks for each person with a most certainly high margin.


As an Aussie living in North America I can tell you that portion sizes over here have absolutely zero to do with what people can actually eat.

Even though they've eliminated Super Size (since the movie) the large coke at McDonald's USA is still massively bigger than the large in Australia

More is more.


Something it took me a week or so to realise in the US is that at restaurants, no one really expects you to eat the entire meal - portions are such that you couldn't possibly go home hungry, which seems to lead to a lot of wastage.

Restaurant portions are much smaller in Australia (as you'd know), but generally people will eat the entire plate, and maybe an entrée (starter) too.

This doesn't really apply to fast food, though - since if you want less food you can just order a small. My girlfriend and I would order two burgers and share a small chips & drink in the US because the portions were so large.


> no one really expects you to eat the entire meal

True. It is completely accepted to take leftover food home from all but the highest of high class restaurants. A typical restaurant dish will make up something like 1-3 servings.

A variety of reasons might be at play, but I think the lack of social inhibition for taking food home is part of it. Most restaurants will ask if you'd like a box if there is food remaining at the end of your meal.


Indeed. I believe this is so because restaurants here do not want anyone to go hungry. That includes people who are rather large. If you must guarantee that people up to say 400 lbs always go home satisfied by giving them enough food, there will be way too much food for someone who is 100-200 lbs. This does place the burden of portion control on the eater, which can be problematic for the eater, but is not so for the restaurant. A much worse fate for the restaurant would be losing customers permanently because they did not serve enough food. There is only one restaurant in the US that I've ever been to that didn't provide enough food and I will never go back to it. (I'm around 200 lbs so I'm not expecting a whole ton either.)


Some fast food restaurants, including many if not most standalone McDonalds do more business through the drive-through window than in the seating area. So, if people decide they want more of something, or want a dessert, they can't really go back. Since the cost of the actual beverage or French fries is negligible compared to the other sunk costs, it just makes sense to give people a quantity that is "sufficient".


Small nitpick: s/wastage/waste



Thanks! I thought I had checked. I learned something today!


BuzzFeed did a short video on this and the US and Australian McDonalds large are very similar.

http://i.imgur.com/UJMBMEA.png

It is BuzzFeed though -- so who knows.


Hmm, that's odd. When I was in the US, fast food restaurants tended to have much larger cup sizes - with hard plastic rather than a paper cup in the large size, presumably for stability (like [1]). In that comparison image, the small would be an Australian medium, the medium a Large and a US large size only available at cinemas who have enormous cups.

[1] http://i.imgur.com/g8qLjAQ.jpg


The largest size purchasable in Germany at McDonalds is 400ml, less than one pint.


In Australia, the Large is the biggest size you can purchase. I believe in the US there's another, larger size?


There used to be. Now it's just S/M/L (plus a very small children's size) which are 16/21/32 oz.

This is also another pricing curiosity. Who buys a large when there are free refills? I guess I don't understand it, but I gave up drinking everything that is in a fountain many years ago. When I eat out I usually just don't drink anything except coffee or water.


You raise another important point - Australia doesn't have free refills, for any size.


You buy a large if you aren't staying in the restaurant. Drive thru and to go!


I wish they'd textually labeled the countries. Maybe I'm geographically illiterate.


Japan, India, HK, UK, Australia, USA, Canada, Singapore

Tiny city-states are not known for being particularly recognizable unless you've been there.


FWIW, in Germany they sell 4, 6, 9, and 20 pieces.


Germans are better at math so you have to throw more curve balls.


But the largest drink size here is 40cl, which is less than a pint.


But the prices are in euro.

I'm writing this just to illustrate my point: why "but"?

You make it seem like your statement is contradicting mine, yet I fail to see the connection.


Your statement makes it seem as if "Super Sizes" would be common here, too. Well, they are sometimes, but not always. It’s a weird limbo state, where you can buy 4 McNuggets, or 20, but the largest drink is 40cl, while in the US the largest McNuggets serving is 20, but the largest drink 118cl


Wait, people actually use cL in Germany? I thought most metric countries would say "400 mL" instead (that's what we do in Canada anyway). It seems so arbitrary to me - if not sticking to powers of 3, then why not just say 4 dL?

(Not that there's anything "wrong" about this - I just don't understand why.)


well, normally people use ml for everything, but cups and bottles from US companies are sold in cl sizes. Coke glass: 50cl. IKEA glass: 200ml. McDonalds cup: 40cl. Glass in a local restaurant (if not coke glass): 200ml.


Here in Spain it is the same, 4, 6, 9 and 20 pieces


It's rather difficult to avoid posting a Pulp Fiction quote on this thread.

I think the most interesting global evil megacorp franchise country might be Japan. On one hand, the Americana brand is very strong, on the other hand there's no way US sizes would work in Japan.

In the end (if things haven't changed in ~13 years) McDonald's/Burger King end up being almost as raw a deal in Japan as in Norway. Of course in Japan, you get much better service. That's just the way Japan works.

Can you really get a beer with your burger in Amsterdam?


You can in Germany but the decision to offer it or not is left to the individual restaurants and I never noticed them advertising it or even listing the price but I may just have missed it or been in a restaurant not offering beer every time Pulp Fiction crossed my thought while being there. So I guess you could probably get one in Amsterdam even if not in all restaurants.


>Can you really get a beer with your burger in Amsterdam?

You can in Spain, although unfortunately it's only available if you choose to eat your meal inside the restaurant ;P


The in depends on the franchise, I can take the beer even if i eat outside the restaurant or if I take it away yo home.

I talk McDonalds in Barcelona province. The only problem is that the beer is Cruzcampo :P


You can in Paris, it's about the cheapest place to get a beer on the Champs Elysees


Come to Portugal. We'll serve you beer with your burger!


Another reason to try to make it to Boom! festival next year!


These replies are fantastic, thank you everyone! :-)


You cannot in Amsterdam, disappointingly.


I don't know if you can buy beer in Amsterdam but in Spain and France yes.

I think you can't in Italy


I recall going to Burger King recently and they had a small ICEE for $1.00, medium for $1.25, and a large for $1.00. No special going on.

I was surely confused by this pricing, but after reading this article it all makes sense now.

I imagine many people looking at the menu and thinking there is a discrepancy or perhaps an error in the menu, something to surely take advantage of. Most people might not have planned to purchase an ICEE with their meal, but then again who can turn down a "free" large ICEE for a buck? I didn't...


I've run into those scenarios before and gone with the small. The large has a net negative impact on you. Honestly, buying soft drinks are net negative regardless, but better a small net negative than a large net negative*.

The look on the cashier's face is interesting - they feel like they are doing a disservice to me if they can't convince me to take the large...


This happened for me with free ice cream that comes in a meal. I asked cashier not to make it.

- But it comes for fee

- I don't want it.

- It's free. It comes with a meal.

- Just skip it.

She still made it. I ate a third of it. Don't like throwing food away, but it was too much.


'Please give it to the next person who cannot afford a full meal', maybe?


I would assume that most people making a decision between these options don't treat any of them as a net negative (Which is why they're paying for them...)


Unless you have a few people with you. Then it all breaks down, because you no longer need 3 drinks.


Well I'll happily turn down a giant cup of sugar any day. You'll have to pay ME to drink an Icee.


I wonder whether McDonalds optimize their prices. Probably? Seems like an easy win.

If so, the answer might be that McDonalds price the items this way because empirically this is what yields optimum profit — and nobody knows a deeper answer.

In fact even if the pricing model was suggested by someone based on a psychological theory, if the empirical finding was that it was worse, the change would be reverted. So, even if a human suggested the change, they could be only accidentally right --- and again, nobody would be able to tell you the truth of this.


Seems like the simplest explanation. A franchise this large MUST BE doing price optimization. It would seem irresponsible if they were not.


Really cool read; had me learning a lot about economic theory. That first blurb about The Economist was enlightening!

Not many are buying Chicken McNuggets for their entire family because 68% of sales are for a 10pc meal that feeds at most 2 people. The reality is that people are buying chicken nuggets for themselves and/or another person. Not many can stomach 20 nuggets at once, and certainly no one wants leftover McDonald's.

(According to the author's discretion, I may be taking that sales data too seriously.)

To me, this seems like a symptom of McDonald's collapsing in the States. I wonder if the author's mistake was searching for a lesson from a nationally failing franchise.

Provocative article, nonetheless! Good share.


The glaringly obvious explanation is that people are buying the quantity they wish to eat. Why is it so unbelievable that people will buy 10 nuggets instead of 20 for the same price? I'm not going to take 10 extra nuggets and either throw them out or put myself into a food coma.

If we were discussing 1 vs. 2 cans of soup from the local grocery for the same price, of course everyone would buy 2 - you can save the additional can for another day. Here, we're talking about fast food that has to be eaten within a couple of hours. There is no "deal" to be had by buying a larger quantity if you're not willing to eat it.

The only sad thing about this article is the apparent inability to understand why someone won't stuff their face with more food than they can eat without making themselves sick and likely obese.


The buyers are undergrads. They could easily turn around and sell the remaining 10 nuggets for $1 to their roommate or classmates. There are always hungry people within arm's reach looking for a deal in college.


As a college student I had much better things to do with my time than try to sell 10 McNuggets for $1. I'd much rather eat the 10 and get on with my life than carry around an extra 10 nuggets to try and make a single buck.


So give it away for free. After eating yell "I have extra, anyone want some free nuggets?". If no takers just walk away.


Have you ever tried this? In my experience, people tend to favour handing over their own money rather than taking something from the weirdo shouting 'free nuggets'.


Which is why I'd be the guy studying at McD's in ear-shot of the cashier. When I hear somebody order 10 I ask them to order 20 and I'll pay them a quarter.


Yeah, I think all the drink prices are the same, too, but... I just don't want a large drink. And that's assuming I buy one to begin with.


The author's sales data is for undergraduate students, so extrapolating to family meals may be misguided.

That said, I think quantity is key here. There may be a correlation between "concern about calories and transfats" and "need to price discriminate". Those who's buying patterns are less price based (higher income and higher household income while being raised) are possibly more likely to be worries about their consumption habits, whereas buyers for whom price is a big deal want to maximize caloric intake for their $$. Thus, McDonalds is successfully getting a reasonable margin for natural 20pc buyers, and double that for 10pc buyers who wouldn't care about the price anyway.


The author is also a Dartmouth student, so his customer base of undergraduates is not exactly the same as most samples of undergrads. Ivy League students tend to be a lot less price-conscious.

The bigger question, is whether his service operates late-night. With Gusanoz gone, pretty much the only option for late-night drunk food is EBAs, home of the most godawful and expensive pizza I've ever experienced. If somebody opened a 24-hour hotdog cart or something and parked it on Webster Avenue, they'd make a killing.


The author gets tantalizingly close to the answer when he notes that 10 pieces cost $1.49 at Burger King, which is significantly cheaper per nugget than 20 pieces at McDonald's.

The reason 20 pieces cost the same as 10 pieces is to make the customer think they're getting a deal, which will lead them to gravitate toward that item over other items on the menu that are actually lower margin for McDonald's.

That people still buy the 10 piece item at McDonald's is just an example of the fact that though firms are rational, individuals are idiots.


Isn't that what the "Decoy Item" is?


sometimes people don't look at the prices and just order what they want. i can't remember the last time i cared what a burger or burrito cost. i order what i feel like eating.


We don't all light our cigars with $100 bills.


Sometimes, individuals aren't that hungry.


It could also be that they priced the 20 piece at a reasonably high margin and the 10 pc was half of that to begin with. Then they experimented and realize that demand is inelastic to price.

From there they just kept stepping the price up and discovering it was the same as the 20 pc and that's the equilibrium we are in today.


Here in San Diego, when I try to buy an sausage & egg mcMuffin, they always try to sell me two, because it is the same price as one. The only logical explanation I've come up with is that when I gift the excess sandwich to someone, it anchors the brand in that person's mind. Viral marketing of sorts. Or maybe they want to fatten me up, so I return in the future to order more food. It could also be that there is no rationale other than that they've found it to increase sales. Maybe they can't explain why it increases sales, but they do it because it does. Sort of like A/B testing in web.

They also employ other gray marketing tactics, for example on the combo menu they'll put the price for the "small", however if you neglect to specify a size when ordering you receive the "medium" by default, which results in your total being more expensive than you thought it would be. I guess because of their disclaimers, its not legally false advertising.


Two for $x could most definitely yield more profits that 1 for $.5x


Sounds like he means two costs $x and 1 costs $x. i.e. literally the same price.


Right, but $.5x for 1 is not an option.

Scenario 1: 1 for $x

Scenario 2: 2 for $x

Which yields higher total profit (not % margin)? I think a lot of people including small business owners don't realize the important difference between total $ profit and % profit.


But they don't price it for 1. They price it for two. It's like wanting 1/2 of a Big Mac. You have to buy the whole offering.


I'll toss another idea out there - a 20 piece is a LOT for one person but could be an option for 2 adults or even a single parent and two kids.

And if you can reel in 2 - 3 people for a "healthy" chicken entree you sure bet can sell some insanely high margin soda and fries x2 or x3 which I'll bet pushes total avg ticket margin higher than the 10pc.


Right. The one thing I never forget about McD's is that drinks are pure profit for them. The drinks are less than 10 cents a gallon for them


Yeah but that doesn't explain the identical pricing.

If you charged even $7.00 for the 20pc, it'd be close enough still.


This is exactly what McDonalds stores in the Seattle market do. The 10 piece version is $4.59 ("regular price") while the 20 piece is $5. They even package the 20 piece as two boxes of 10 pieces each.

I commented on it to a store manager--he and I chat a lot, I eat at McDonalds far, far more than I should--and he said that franchisees do it because corporate rebates them a ton of money for the promo price, company-owned stores do it because that's what corporate tells them to do, and corporate does it for a reason that is unknown to anybody outside of Oak Brook, IL.


I ate 20 (uk) mcnuggets once, as a child (guess I was about 11-12); I was a BIG fan of mcnuggets. I was skinny as a rake, but could always put away pretty big quantities of food. I am now a vegetarian who could do with losing a pound or two. Draw whatever conclusions you want.


A few years ago I was at Orchard Supply Hardware to buy some cable ties. They had three different quantities available:

10 for $4

50 for $6

650 for $8.50 - a big plastic canister of all different sizes and colors

(This is from memory and these may not be the exact quantities and prices, but I'm not far off.)

I only needed a few, but naturally I bought the canister of 650. At the rate I use them this is probably a lifetime supply!


Anyone else notice how this website is using click jacking to force you to like their facebook page?


Here's a theory: people who buy McNuggets on their own to eat as a meal for 1 to 3 people want to buy 20. The 10-piece is for combo meals, with fries and a soda; it's on the menu because if they have a 10-piece McNuggets box for the combos they'll sell it on its own if you really want one, but they'd prefer not to. They want you to buy either the 20-piece, or the combo, and they don't want to give any price break on just buying 10 nuggets because that's not to be incentivized.


Perhaps McNuggets are normally sold as combo meals, and the whole purpose of offering cheap 20-piece nuggets is upselling people to a combo with better drink margins. In that case, the relative profit between a 10-piece combo meal and a 20-piece combo meal could be about double in the latter. Perhaps raising the 20-piece prices deceases the likelihood of an upsell.


The most terrifying option? It was algorithmically determined and no human really knows for sure.


At the telco I just left we often had this scenario for a few different reasons - decisions made by committee, lack of documentation, people quit/retire/move, etc.

Nobody knows the details about massive pieces of the business.

I just stopped asking "why".


The A/B testing came to the conclusion that the sales are the best like this. Nobody knows why...


Why is that terrifying?


What I really don't understand is why they have the McDouble and the Double Cheeseburger. Are people really paying a dollar more for a slice of cheese?! Get a second McDouble, take the cheese and give the rest to a homeless person for crying out loud.


> Are people really paying a dollar more for a slice of cheese?!

You are exactly right, and here's a news article to prove it:

"The company embarked on a series of focus groups and extensive research. One message was loud and clear: People wanted to get their beloved double cheeseburger, with two pieces of cheese. If that meant paying a bit more for it, so be it. ...

So McDonald's decided on a two-pronged attack. Raise the price of the double cheeseburger to $1.19. But keep penny pinchers happy with a new burger on the dollar menu: The McDouble. Two beef patties with just one slice of cheese. " - http://abcnews.go.com/Business/Economy/story?id=6803935


First rule of business: TAKE THEIR MONEY!

(Or, the inverse of: SHUT UP AND TAKE MY MONEY!).

People want to give you money for practically nothing? Good. Take the money. People want to pay more (or the same) for less? Good. Take the money.

What's with this fiction of "you get what you pay for". You hardly ever do, and that's ok. Our markets aren't rational. If they were, why would companies advertise?


After reading the article, the talmudic joke about two men falling down the chimney sprung to mind. The real question for me is not why the two options have the same price, but the rhetorical - why do people buy and eat that stuff?


OH: "Remember that time someone at HQ dragged a cell in Excel and the internet went crazy over nugget prices in NH?"


Yes, I remember that marketing gimmick as well. (Actually I don't at all, but if that really happened it was much more likely intentional)


This is functionally the same thing as a 2-for-1 sale. Not that I really know what such sales are supposed to accomplish, but you see them frequently enough that there must be some reasoning behind it. Maybe getting a free second thing makes you more likely to buy the first one than getting it for half price? Maybe it lets you set the minimum price for "some X" higher than you'd normally be able to?

I really don't know. It may be weird, but this sort of pricing definitely isn't rare.


In the UK, my experience is that I rarely notice these deals, but when I get to the counter with a single item, the person behind the counter points out the deal. I then have to make a decision of whether to go back hunting through the store for the second item, or forgo the saving. I almost always do the former, which is awkward if there's a queue of people behind me.


Is it possible that the difference in cost of producing ten Chicken McNuggets and twenty Chicken McNuggets is negligible?

Chicken McNuggets are likely produced by machines, since they all come in the same n shapes (n a small integer). Whether I order ten or I order twenty, I feel like the McDonald's employee opens a bag of them into a fryer without counting them out. Maybe they always cook the same number in a match to keep the result uniform. Maybe the difference in cost for the two box sizes is trivial. And maybe the other half of the batch has a non-trivial probability of being thrown out because another order of 10 McNuggets won't come within "safe" food serving time, so they may as well give it to me for the extra $0 to make it feel like I got a deal.

Or maybe it's just something Marketing thought up, even though it reduces their profits. I'm under the impression that in other countries (Canada?) the retail price of 20 McNuggets is greater than 10.


I think think this article and the discussion demonstrates more about cognitive bias than anything else. The assumption that an individual is purchasing 20 pieces is probably a leap in the wrong direction. I would assume that McDonalds are direct marketing this price point to families, who they know are buying a range of other items on top of a shared serving of chicken. It's like a cheeky wink to them that they get a bonus for the bulk custom, that they know no individual could eat, just like a fish and chip shop will throw in more calamari than ordered for a large order. The reward probably doesn't cost them much but it keeps these group orders coming back.


I bet most people don't even look at the price.


I'm certainly victim of that.

It becomes so common to just whip out the credit card and tap to pay for things you think you know the general price of that you don't even really look at the price anymore.


Or software sometimes.

At KFC If you place your order as "2 breasts, 2 legs, 2 wings, 2 thighs" you pay 4 dollars less than placing it as "8 pieces chicken only". The same exact order, but when they punch it as 8 pieces it costs more.

Go figure.


I just want to point out that while the decoy item directs people to the less expensive choice (20pc) it's also the more profitable choice. Two 20pc orders of McNuggets cost more than one 40pc order.


-Right now our area has a special - 10 for $1.39. Last year they had 4 for $1.00. Regular price here is $5.00 for 20 piece and around $3.50 for 10 piece. People have been buying alot more nuggets but I still see poor people like me buying the expensive burger option. I think the crumbs users are just buying the 10 piece because they don't realize the 20 piece is the same price.


i don't think the people at McDonalds actually went through all these theories to come up with the pricing for nuggets

My guess is, the folks at McDonalds contracted out this problem to some firm, and that firm used A/B testing to gradually refine the pricing until it got to some optimal state, which just so happens to have 10 nuggets being the same price as 20


I can assure you the world's largest fast food chain, in existence since 1940 that has annual revenues of $27.5 billion has spent a massive amount of time and money analyzing and refining the prices for every product.

I can't back it up, but I'd wager they've spent many tens of millions doing exactly that.

(I worked at a telco that was spending an ungodly percentage of revenue doing just that)


The point is, maybe this was optimized empirically, and the explanation is unknown or very complex.


yes i don't deny that they probably spent a lot of time and money on this, as you said

what i'm saying is, they probably still ended up using A/B testing to experiment and verify the truth, and used that to make the decision

sure, they could have had analysts that wrote reports on every "could be" scenario (of which 10-is-same-price-as-20 is one). But i'd say those analysis or theories had very little or even nothing to do with why ncnuggets are priced this way.


Isn't it at all possible that it's some kind of mistake? Miscommunication, different prices changing at different times, and/or people not caring led to them being priced the same? It's not as if the two options are the same price at every single McDonalds, just this one.


$5 for a 20pc and ~$4.50 for a 10pc is fairly standard among franchises and regular at corporate stores.


Sorry, I know this isn't reddit, but speaking of the economics of McNuggets this classic monologue from The Wire is too good not to revisit: https://www.youtube.com/watch?v=Cvq3Pf3j61c


What I learned: Dartmouth students have plenty of money, because I know they're not this bad at math. I don't care how bad a McNugget tastes reheated. I'm buying 20 and putting 10 in the fridge. At the very least I'm giving the uneaten ones to a friend on the hall.


Maybe it's because main numbers in nuggets price are from serving the client, not from the source material of nuggets. Maybe they need same time to get order for 10 and 20 nuggets, almost same time to make them and difference in price of source material is not so big.


It doesn't cost much (if anything) more to produce 20 instead of 10, but by offering both at the same price, the choice is left to the consumer, who feels "better with themselves" for choosing the 10 nuggets (but they know they could have gotten 20.)


Has anyone gone into a McDonald's to verify this wasn't just a pricing mistake?


in my area Burger King sells 3pc French Toast Sticks for $.99 and 5pc for $1.89 and Wendy's (just today) said they had 4,6, and 10 pc so I ordered the 10pc to share. 4pc is $.99 and 6pc is $1.69... If I had known I would have just ordered two 4pc for $1.98. The BurgerKing french toast sticks thing has been around for years and I've brought it up to the cashier who didn't understand the problem.

If you don't see this at fast food just look around the next time you are at the grocery store. More and more the general shopping public assume buying more equals less cost per piece without checking the math.


Maybe the two items target different groups of clients with different budgets (single people versus families?), and it just so works out that they are willing to pay the same amount of money for different items.


Sometimes, many times, I would pay the same price, but take less food. That is e.v.e.r.y time I eat at a restaurant. The portions are just too large, and I prefer to not take anything home.


The assumption is that 10 nuggets and 20 nuggets are alternatives that should be compared. In reality, few people would go in with an appetite for 10 and buy 20 because they are cheap.


How about a larger size which is less expensive than the smaller size?

http://i.imgur.com/k8Dup.jpg


10pc for 6.40 is overpriced. Burger King or Wendy's equivalence cost less than half of that.


As is mentioned in the article.


Eugenics?


Really interesting read...




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