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June 29, 2005Taste of Chicago 2005: An Economic PerspectiveBattled the crowds at one of Chicago's greatest foodie events, Taste. It's an annual celebration held in Grant Park featuring about 40 Chicago restaurants. Temporary stands and kiosks get set up with grills, fridges and chefs, and thousands of people snap up ticket strips, 11 for $7. Note, that is 63 cents per ticket! Each restaurant offers three or four speciality items. For example, a Jamaican restaurant offered curry goat, oxtail soup and plaintains. Each one of those specialty items goes for about 8 tickets on average. So it all works out to about $5 an entree. However, there is also the smaller "Taste Portion" option for about 3 tickets, or $1.90. Considering the size of the entree and the taste portion, it gets pretty expensive. Roast corn generally runs 4 tickets. That's $2.52 for an ear of corn. As you can see, it's brilliant economics in play. By forcing the consumer to purchase tickets, Taste gets the consumer to dissociate the tickets from their actual monetary value. As such, the consumer is less likely to "bargain shop" as the perceived difference between 3 and 4 tickets is very low. However, the actual difference is $0.63! Additionally, the consumer is forced to purchase tickets in strips of 11. Eleven is an odd number, you usually end up with enough tickets for one item, and a few leftover tickets. In order not to waste the leftover tickets, you buy another strip. So instead of spending $7 on a meal, the consumer is encouraged to double that spend. $14 on one meal! However, the whole model falls to bits the last hour of the festival. There is rampant deflation and the ticket strengthens. A taste portion of Italian ice during this last hour is close to quart size. An 8-ticket entree of bbq ribs could be the whole side of a cow. Food vendors are calling out offers as fast as frantic traders in the pork belly pit of the Chicago Merc. "Two for one! Two for one!" "One ticket gets you anything!" "Anything for three tickets!" However, none of those vendors are giving out free food. No matter what, there is a transaction. Ticket for food. Additionally, the vendor wants to get rid of all that food to avoid transport, storage and/or waste. However, the ticket still has value. When the vendor redeems their horde of tickets with the event organizers, it can be assumed that they get the face value of the ticket, which is $0.50. Presumably, the event organizers reap the difference between what they charge consumers for the tickets and what they redeem the tickets for in the end. So in that last hour, consumers and event organizers profit the most, but vendors are able to limit their losses. It's an interesting market forces free-for-all, definitely. But it only happens in that magical last hour of Taste. Extrapolate that model, and it could illustrate what would happen to the markets if Armageddon were to hit. A re-valuation of everything, from goods to currency, occurs in the last stage of a terminal economy. Posted by carolyn at June 29, 2005 08:54 AM CommentsFew disgreements! Tickets are $.50/ticket at Dominick's, so $.50 cannot be the face value of the vendor. As a result, each item is $.50 more if you buy at Dominick's :). I agree with the last hour, except you can probably just get tickets from people who overbought and want to get rid of them before leaving Taste... so "Free food". As a result extrapolate high supply of tickets and low demand of food at end of day, you get virtually free food as the day comes to the end. Free if you can scam some innocent folks who bought 50 tickets thinking they would eat that many Turkey legs from Helen's! Posted by: MannyPants at June 29, 2005 03:22 PM Agreed, if a consumer purchases their tickets at Dominick's (a local Chicago grocery chain), then the event planners probably do not get the spread. However, tickets purchased at the event, which is likely where the majority of tickets are purchased, are sold 11 for $7. And you're absolutely right about consumers passing tickets to other consumers during the last hour. However, that doesn't really change the model because tickets are still eventually exchanged for food. I have never seen a consumer give a ticket to a vendor in exchange for nothing. Think of it like this, the interplay happens because there is an exchange of currency for goods between two parties. The universe of consumers make up one party, and the universe of vendors make up the reciprocal party. Posted by: Carolyn at June 29, 2005 03:30 PM I don't think event planners can tell a difference between dominick's or event bought tickets, thus the spread has to be from the $.50/ticket. My guess is Dominick's probably makes $.13/ticket for selling it at the Taste. consumers/vendors is the world... interplay is everywhere.. agreed Posted by: MannyPants at June 29, 2005 03:33 PM Actually, if your entree costs $5, you are forking over 10 tickets. The value of ten tickets is even higher if you purchased your tickets at the Taste of Chicago rather than at Dominicks. That almost a whole strip! I'll be setting of cost of food by stopping at Starbucks for some free ice cream today(http://www.starbucks.com/retail/icecreamsocial.asp) on the way to the Taste. Posted by: SandyPants at June 29, 2005 03:38 PM Post a comment |
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