I don’t want to complain, but my favorite lunchtime haunt has the rudest waiter I’ve ever encountered—and I don’t think it’s an accident.
The restaurant is famous for its superb, sophisticated Italian cooking and it prices accordingly. A romantic meal for two will cost you around $150, plus the price of your selection from a wine list of biblical proportions. Even if you pick the cheapest main course on the lunch menu and sip water, this frugal lunch for one will set you back $15.
Or, you could sit at the bar or one of the tables in the bar area. The food is still superb: You can fill up on rich, soft pork meatballs nestling on pillows of light polenta for about $8. The veal ragu is rich but you don’t have to be, because this perfect spaghetti is half the price of a pasta dish in the main restaurant.
It sounds too good to be true, but I’m afraid that there is a catch. To get to the food, you have to get past the barman who takes your orders, a man more Bond villain than busboy. To walk into that bar is to laugh in the face of fear.
The barman welcomes me with all the warmth of the Transylvanian butler in B movies. He drops menus on my table with a sneer as I try, pathetically, to sound grateful. He repeatedly ignores my attempts to order. As he walks past, my companion whispers that he picked his tattoos up in a Russian prison. I think she’s putting me on, but I can’t be sure.
It’s possible, of course, that this man is in the wrong job by accident, and when the restaurant owner reads this column and works out that it’s about his restaurant, “Igor” will be fired. I’m not convinced at all. I think Igor is all part of the plan. One food critic described a previous bartender as acting like she just got back from a tax audit. (She must be a different bartender: There is no way Igor was ever a “she”.) “Venomous” is obviously in the job description.
Why would a restaurant deliberately sabotage the dining experience? A restaurant with a good reputation and a brilliant chef acquires some degree of power to name its prices. With that power comes the temptation to try to separate out customers and charge a high price to the expense-account lobbyists and a cheaper price to me and my friends. A nice idea, but trying to charge different prices for the same product is not easy. Something must be done to keep the lobbyists in the full-priced restaurant, and that something is Igor.
This sounds odd, but it’s not really so unusual. Think of Adobe’s Photoshop Elements, a product that is often described as a stripped-down version of the image-processing software Photoshop. It doesn’t cost Adobe any more to ship a Photoshop CD than to ship an Elements CD, and stripping out those extra features was surely an additional expense.
Intel introduced two versions of the old 486 computer chip; the cheaper version was the expensive version with some extra work done on the chip to reduce its speed. IBM’s LaserWriter E, a low-end laser printer, turned out to be exactly the same piece of equipment as their high-end LaserWriter—except that there was an additional chip in the cheaper version to slow it down.
Beyond the high-tech industries, consider multipacks in the big box supermarkets. A manufacturer produces a gigantic pack of 12 four-liter bottles of lemonade at a higher price: It must hire a professional packaging company to bundle them together. As with Intel, IBM, and Adobe, the inferior product costs more to produce. The payoff is simple: It enables retailers to target price increases at shoppers who prefer something easier to carry, even if it is more expensive. And, of course, I have already reported on Starbucks’ “short cappuccino,” a cheap product so superior to everything else the company sells that they are obliged to obscure its very existence.
A lot of people find all this outrageous, but I’m not sure the alternatives are better. IBM could have specifically designed a low-end printer rather than crippling the high-end one, but that would have been more expensive and would have helped nobody. Or IBM could have slashed prices to business customers despite finding willing buyers at high prices, but this seems beyond the call of duty for a profit-making company. Or IBM could have passed up the opportunity to serve low-end customers altogether. That would have been no better.
In the end, the problem is not the funny pricing tricks but the market power that makes them possible. The solution to that is competition: Customers can, after all, always vote with their feet, and buy a different printer or eat lunch at a different restaurant.
One day I shall have an expense account, and I shall dine in the main restaurant where, no doubt, the maitre d’ looks like Pierce Brosnan and sylphlike waitresses will give me massages. Until then, I will eat great food at low prices, and Igor will keep the lobbyists away.
The Undercover Economist appears on Saturdays in the Financial Times Magazine.