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Comment by handsclean | Hacker News Reader

If it were a subsidy then Wendy’s would be closed during downtimes.

If it were about wages then the plan would raise prices when wages increase overnight, not lower them. In general, prices are always about demand, not cost.

People don’t cancel their weekend plans because Uber isn’t surging, they avoid or delay Uber when it is surging. It’s about spreading out the surge.

Acting like the opposite is untenable is ridiculous, it’s the way the whole world works and has worked forever, except for one industry that gets away with everybody hating them because people have no alternative.

It’s solely about increasing profits at the expense of customers, let’s not pretend anything else.

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> If it were a subsidy then Wendy’s would be closed during downtimes.

Which is what happens, many restaurants now close earlier, open later, close during the afternoon, or otherwise reduce hours.

> In general, prices are always about demand, not cost.

Prices are the intersection of supply and demand, with a lower limit being the cost of goods sold.

> Acting like the opposite is untenable is ridiculous, it’s the way the whole world works and has worked forever, except for one industry that gets away with everybody hating them because people have no alternative.

This is not true, spot pricing exists in many, many businesses. Obviously, the volatility of price changes is usually eaten by merchants at the retail stage in many businesses, but there is no need for it to always be the case. Many restaurants have "lunch menus" for this very reason. Even in theme parks, they effectively engage in a hybrid of spot prices by allowing people to pay extra to cut in line.

> It’s solely about increasing profits at the expense of customers, let’s not pretend anything else.

Yes, that is called business. No one accepts $20 per hour if they think they can get $30 per hour.

Supply and demand curves are constantly in flux, regardless of how often Wendy’s changes the prices on its menu. The only question is how much utility the merchant thinks they will get from eating the cost of the volatility versus letting customers be exposed to it.

A kitchen surely has a fixed limit to how much food it can serve up, so the supply has a cap, which a higher price can be obtained, which means the merchant can better compete with other businesses along other lines, such as investing in the facility, paying employees more, building more restaurants, etc.

And obviously, the barrier to entry in the food business is extremely low, and the prices people are willing to pay are relatively low, so even if Wendy’s managed to extract a few extra percentage points of profit margin from more accurate pricing, it is not going to turn into a trillion dollar business.

> Which is what happens, many restaurants now close earlier, open later, close during the afternoon, or otherwise reduce hours.

And the hours that they remain open are not being subsidized, so your initial assertion that off peak customers are being subsidized was not true.

> Yes, that is called business.

Since you so accept acting purely in your own self interest, then surely you feel the same righteousness on behalf of customers responding inline with their own self interest, right?

You continue to conflate this announcement of time of day pricing with just about every other influence on pricing, even those working in the opposite direction. Prices already change all the time, the new thing is just the surge pricing. There are many ways to deal with surges, from dynamic staffing to streamlined kitchens to additional locations to what’s presumably the current strategy, all of those plus sometimes making people wait. Wendy’s seems to believe surge pricing might sometimes be the most profitable option, whether that’s true depends entirely on specifics that we don’t have and customer response.

>And the hours that they remain open are not being subsidized, so your initial assertion that off peak customers are being subsidized was not true.

Some off peak customers may be subsidized, for example those who want food at 2AM when volume is low and labor costs are high. Some off peak customers may not be, for example 2PM when the staff still needs to be there and have downtime.

>Since you so accept acting purely in your own self interest, then surely you feel the same righteousness on behalf of customers responding inline with their own self interest, right?

I cannot parse this statement. Everyone should do what is best for them, and try to avoid getting the short end of the stick. Obviously, the seller is going to try to sell to each individual at the highest price they are willing to pay, and the buyer is going to want to buy at the lowest price the seller is willing to accept.

>You continue to conflate this announcement of time of day pricing with just about every other influence on pricing, even those working in the opposite direction. Prices already change all the time, the new thing is just the surge pricing.

My point was that spot pricing can allow costs to be allocated more accurately to ensure the most efficient allocation of resources, including money to hire workers.

>There are many ways to deal with surges, from dynamic staffing to streamlined kitchens to additional locations to what’s presumably the current strategy, all of those plus sometimes making people wait.

I agree.

>Wendy’s seems to believe surge pricing might sometimes be the most profitable option, whether that’s true depends entirely on specifics that we don’t have and customer response.

Yes, it is certainly a gamble like every business decision. The pricing experiment could turn sufficient people off that it costs them more than it benefits them. The difference these days is that technology allows variable pricing to be implemented in a much more granular and economical way than in previous decades.

Cost of Goods Sold isn’t a lower limit. Excess inventory will be sold at a loss before written off entirely.

I meant for a business that is attempting to price their goods/services on an ongoing basis. Obviously, if the business is going out of business, then goods/services might be priced below cost, but otherwise, outside of loss leaders, one would not expect a business to sell something for less than it cost them.

> Many restaurants have "lunch menus" for this very reason.

Which is fine. That's predictable. The problem with dynamic pricing is that it means you never really know what something is going to cost until you're at the point of purchase.

> Even in theme parks, they effectively engage in a hybrid of spot prices by allowing people to pay extra to cut in line.

Right, which is a practice that I consider to be egregiously terrible and avoid those places that pull that kind of crap.

In the end, I recognize that my opinion of these practices doesn't matter. I'll avoid patronizing businesses that do this sort of thing, but it won't change anything. It just means that as time moves forward there are fewer and fewer establishments that I will give my money to.

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